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Inflation isn't stirring, but still the biggest risk to investors even as it's 'least apparent': Brown Brothers

The biggest menace to investors now is not turmoil in Washington, geopolitical risk abroad or central banks' decisions, but something that may seem much simpler on the surface: inflation.

What's more, the risk of inflation ticking up is one of the "least apparent" dangers now, according to a new report from Scott Clemons, chief investment strategist at Brown Brothers Harriman.

At least for now, price pressure in the economy remains benign, although the Federal Reserve is moving to preempt inflation with its campaign to hike rates.

"Nobody is interested, nobody cares, and nobody seems to be worried about the threat of rising prices," Clemons wrote, recalling a market truism that the least apparent risk is inherently the most dangerous.

Appearing on CNBC's "Trading Nation," Clemons pointed out that, at the moment, there's not much inflation to worry about. He wrote in his report that such "apathy" appears warranted.

In a measure often regarded as the Fed's preferred gauge of inflation, data published this week showed the core personal consumption expenditures (PCE) index that excludes food and energy rose a mere 0.1 percent in June, after a similar reading the month prior. U.S. consumer spending, too, barely budged in June.

In another measure of inflation, the Consumer Price Index was unchanged in its most recent reading versus the increase of 0.2 percent expected.

In a rather non-scientific measure of investors' interest in rising prices, Clemons said that the frequency with which people are searching for "inflation," "cost of living," and "Consumer Price Index" on Google peaked in previous years and appear to be falling.

"Wage growth is sluggish, the velocity of money supply is declining, and economic growth is modest at best. Yet ignoring the risk of inflation, as remote as it may be, could lead to unpleasant surprises," Clemons wrote.

He added that it is a possibility that inflationary pressures investors typically see during an economic expansion haven't yet cropped up. Since the end of the 'Great Recession,' the current pace of U.S. growth has been tepid at best, mired well below the economy's long-term average.

No signs of price pressure 

At this moment, the market appears unprepared for a resurgence of inflation, said Bryce Doty, senior portfolio manager at Sit Investment Associates.

"It's surprising how the recent softness in the inflation data has brought inflation expectations down below 2 percent for the foreseeable future," Doty wrote in an email to CNBC on Friday.

Indeed, sources of weak inflation, like expectations for lower energy costs and slack in the labor market, could "easily evaporate," he wrote.

But oil prices have begun rebounding. Slack in the labor market has declined substantially. Unemployment ticked down to 4.3 percent as reflected in the most recent employment situation report from the Bureau of Labor Statistics.

"The outlook for the economy is brightening as well with bank loans growing again after a dormant first quarter," he wrote. "Combine those factors with a 'wait until you see the whites of their eyes' mentality about inflation in the marketplace and you have the formula for investors being unprepared for rising inflation."

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