The global energy crisis and falconry central banks put 1970-style stagflation on the market’s agenda.
Although it is a small possibility for now, concerns about a stagflation scenario with out-of-control inflation and suddenly falling growth started to spread among fund managers, especially in Europe.
Global growth optimism has dropped to an all-time low, according to Bank of America’s fund manager survey this month. Stagflation expectations, on the other hand, jumped to the highest level since 2008, reaching 66 percent.
However, as March inflation reached its highest level since 1981 in the US, data released on Wednesday revealed that UK inflation exceeded economists’ expectations for the sixth month in a row.
Stagflation expectations focus on Europe
As fund managers increasingly prepare for bad economic news, Europe is the main region that stands out in this regard and hopes for a better performance in the continent are determined by the USA. is said to be connected.
Amundi SA is preparing for a possible downward move in the continent, while abrdn Plc has taken a position in favor of the stronger dollar against the euro. Other popular trades include investing in commodities exports from Australia to Canada and in bonds fraught with interest rate risk.
A lot of bad things have to happen before an investment climate with signs of stagflation occurs, and key officials like Christine Lagarde are among those who oppose the possibility.
But one thing’s for sure: Given that novice investors have limited real-world experience with inflation, fewer will remember prices that were out of control at a time when growth plummeted.
Stagflation-like pressures, though confined to Europe, have the capacity to hurt Wall Street investors investing in the international growth story and evoke memories of the sovereign debt crisis and lost decades of growth.
Given its proximity to the Ukraine war and weaker local levers for growth, it’s safe to say that the region is at the center of concerns.