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Barron's interviews Merrill Lynch's chief investment strategist, Richard Bernstein. Current turmoil will not lead to the end of capitalism as we know it, he says. Still, investors hoping for a V-shaped recovery will likely be disappointed.

Bernstein says more than anything people are concerned about inflation, especially in light of recent developments that have led them to conclude the U.S. is printing money, which will lead to dollar devaluation and rampant inflation.

He's not worried:

I think prices are going to respond to the slower global economy. I believe the global economy will be weaker than people think. You always have to make a bet, stronger or weaker. I've been arguing that you should err on the weaker side. If that's true, then demand for commodities, demand for everything, goes down and some inflation subsides. More than anything else, remember that inflation is a lagging indicator and credit is a leading indicator. There's not a lot of credit being issued these days.

His comfort with inflation helps explain his lone-wolf bullishness on Treasurys. "It is just amazing that we have an asset class that is outperforming and everybody still hates it," he says, again pointing out that money - without credit creation - can not generate inflation. He also likes high-quality corporate bonds and munis, but cautions against the allure of lower-grade issues.

Looking at stocks, Bernstein is dismissive of those who keep looking to yesterday's stars to shine again. Instead, they should look ahead to tomorrow's growth stories - which he thinks are going to be decidedly mundane: Staples (ETF: XLP), health care (ETF: RYH) , developed markets over emerging markets, high-quality debt, and the dollar.

Source: Looking Beyond Inflation - Barron's Interview