{"id":1452883,"date":"2022-04-25T13:14:43","date_gmt":"2022-04-25T17:14:43","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1452883"},"modified":"2022-04-25T13:14:49","modified_gmt":"2022-04-25T17:14:49","slug":"financial-markets-brace-for-stagflation","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/financial-markets-brace-for-stagflation\/","title":{"rendered":"Financial Markets Brace for Stagflation"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"float:left\"><div class=\"counts mashsbcount\">10<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Ffinancial-markets-brace-for-stagflation%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1452883&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p><span data-contrast=\"auto\">Waning optimism over global economic growth prospects and rising <a href=\"https:\/\/www.theepochtimes.com\/t-stagflation\">stagflation<\/a> fears have prompted investors to seek shelter in investment hedges.<\/span><\/p>\n<p><span data-contrast=\"auto\">Earlier this month, the Bank of America\u2019s (BofA) monthly <a href=\"https:\/\/www.morningstar.com\/news\/marketwatch\/20220412332\/fund-managers-gloomiest-on-record-as-recession-fears-become-consensus-bofa-survey\">survey<\/a> of fund managers found that optimism about the international economy has slumped to an all-time low.<\/span><\/p>\n<p><span data-contrast=\"auto\">Of the respondents, 71 percent were pessimistic about global growth in the coming months, as risks of a <a href=\"https:\/\/www.theepochtimes.com\/t-recession\">recession<\/a> have turned into the top \u201ctail risk\u201d for global financial markets, the survey revealed. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Should the United States emulate the economy of the 1970s\u2014a blend of stagnating economic growth and skyrocketing inflation\u2014how will the financial markets respond to this type of environment?\u00a0 <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Investment firms have been reallocating their portfolios, pouring into crude oil and other commodities, and placing long positions in resource and healthcare <a href=\"https:\/\/www.theepochtimes.com\/t-stocks\">stocks<\/a>, according to the bank\u2019s poll. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<figure id=\"attachment_4349049\" class=\"wp-caption alignnone\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2022\/03\/20\/Investing_Inflation_Blues_22055495251706.jpg\"><figcaption class=\"wp-caption-text\"><noscript><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-4349049 size-medium\" src=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2022\/03\/20\/Investing_Inflation_Blues_22055495251706-600x400.jpg\" alt=\"Epoch Times Photo\" width=\"600\" height=\"400\" \/><\/noscript><\/figcaption><\/a> The New York Stock Exchange is seen in New York on Feb. 24, 2022. Stocks have been shaky this year, with the S&#038;P 500 at one point dropping more than 10% from its record, mostly because of inflation worries. (AP Photo\/Seth Wenig)<\/figure>\n<p><span data-contrast=\"auto\">With increasing stagflation risks, Goldman Sachs believes that passive investing may no longer be a successful approach for investors, meaning that the standard 60\/40 portfolio\u201460 percent stocks and 40 percent bonds\u2014might not be an effective strategy in a market of inflation, volatility, and uncertainty. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cI would say that the playbook for investments and portfolio construction of the period since the financial crisis may not be relevant anymore. We have entered a period of higher inflation, higher volatility, more uncertainty,\u201d said Maria Vassalou, co-CIO of multi-asset solutions in the firm\u2019s Asset Management Division. \u201cThere is need to rethink how we construct portfolios. Passive investing will be less relevant going forward. I think there is a big case to be made for active investments. There is also a much bigger argument for dynamic asset allocation going forward.\u201d <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Although signs are forming that a recession could be on the horizon, the risks are not serious enough for investors to overhaul their portfolios, Vassalou added. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">With inflation expected to remain persistent and stickier, investors might need to consider embracing a more dynamic inflation strategy, says\u00a0Nancy Tengler, CEO and CIO of Laffer Tengler Investments. She noted that such a portfolio would comprise real estate investment trusts (REITs), precious metals, energy commodities, and robotics. Another theme that traders need to home in on is dividends.<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cCentral banks around the world began hiking last spring. There have been over 100 hikes since that time and the global economy is slowing. The Fed has lagged this trend and now finds itself way behind the curve with a well-telegraphed hiking regime and tightening plan into a slowing economy,\u201d Tengler wrote in a research note. \u201cWe expect to see weakness in the coming quarters in the cyclical names. Investors will flock to reliable growers.\u201d <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Despite equities being resilient during the earnings season, there has been a transition to real assets, purports Mimi Duff, an investment strategist at GenTrust. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">At the same time, Duff said in a recent research note, clean energy positions and taking advantage of decimated sectors could provide opportunities. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cWe continue to like the clean energy theme: expect the world to reduce dependency on Russian oil, gas, and coal, diversifying supply, improving energy efficiency, and investing in renewables. We\u2019ve recently added to positions we already held in clean energy and Uranium,\u201d Duff stated. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cWe are carefully considering when allocations to other very beaten-up sectors (for instance, tech) so stay tuned there. We continue to monitor valuations.\u201d <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<h2><span data-contrast=\"auto\">Is Stagflation Coming? <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/h2>\n<p><span data-contrast=\"auto\">Economists project that the first-quarter GDP growth rate will be around 1 percent. The Federal Reserve Bank of Atlanta\u2019s GDPNow model <a href=\"https:\/\/www.atlantafed.org\/cqer\/research\/gdpnow\">shows<\/a> a 1.3 percent expansion in the January-to-March period, while the latest Conference Board <a href=\"https:\/\/www.conference-board.org\/research\/us-forecast#:~:text=The%20Conference%20Board%20forecasts%20that,year%2Dover%2Dyear).\">forecasts<\/a> anticipate the U.S. economy will slow to 1.5 percent. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">If these projections are accurate, it would be significantly down from the previous quarter\u2019s growth rate of 6.9 percent. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Is the world\u2019s largest economy about to embark upon stagflation as the plethora of headwinds persist and intensify? For the last couple of months, this has been the concern with many economists and financial analysts discussing the possibility of a prolonged slowdown amid soaring price inflation, a global supply chain crisis, lower consumer spending, and the war in Eastern Europe. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Market strategists have been alluding to multiple signals, including soaring wholesale prices and a recent bearish small business report to spotlight a weaker economy. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">A <a href=\"https:\/\/www.nfib.com\/content\/press-release\/economy\/inflation-overtakes-labor-quality-as-top-business-problem-for-small-businesses\/\">survey<\/a> by the National Federation of Independent Business (NFIB) learned that inflation topped labor quality as entrepreneurs\u2019 most important issue. The same poll discovered that nearly three-quarters (72 percent) of small business owners raised prices, and another half of smaller companies plan to continue raising the costs of their goods and services. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">The producer price index (PPI) <a href=\"https:\/\/tradingeconomics.com\/united-states\/producer-prices-change\">advanced<\/a> 11.2 percent year-over-year in March, the biggest monthly jump since November 2010. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">Others point to the various monetary policy mistakes committed by the Federal Reserve, with many arguing that it is going to be challenging for the central bank to curb inflation while trying to achieve a \u201csoft landing\u201d for the post-pandemic economy. <\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">\u201cWe have a huge inflation problem, and the Fed continues to drag their feet. Even though they acknowledge that it\u2019s a big problem, they\u2019re doing nothing about solving it,\u201d Peter Schiff, the president and CEO of Euro Pacific Capital, said on his podcast SchiffGold. \u201cTo the extent that the economy gets weaker, they\u2019re going to try to expand the money supply even more aggressively to try to stimulate it, which is why we\u2019re going to have more inflation during the next recession.\u201d<\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<figure id=\"attachment_4343941\" class=\"wp-caption alignnone\"><a href=\"https:\/\/img.theepochtimes.com\/assets\/uploads\/2022\/03\/17\/traders.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"lazy wp-image-4343941 size-medium\" src=\"https:\/\/www.theepochtimes.com\/assets\/themes\/eet\/images\/white.png\" data-src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/traders-600x400-1.jpg\" alt=\"traders\" width=\"600\" height=\"400\" \/><figcaption class=\"wp-caption-text\"><noscript><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-4343941 size-medium\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/04\/traders-600x400-1.jpg\" alt=\"traders\" width=\"600\" height=\"400\" \/><\/noscript><\/figcaption><\/a> Traders work as Federal Reserve Chair Jerome Powell is seen on a screen delivering remarks at the New York Stock Exchange in New York City on March 16, 2022. (Brendan McDermid\/Reuters)<\/figure>\n<p><span data-contrast=\"auto\">Fed Chair Jerome Powell stated during an International Monetary Fund (IMF) event last week that his goal is to accomplish a soft landing as he lowers inflationary pressures throughout the country.<\/span><\/p>\n<p><span data-contrast=\"auto\">But Diane Swonk, the chief economist at Grant Thornton, <a href=\"https:\/\/www.bnnbloomberg.ca\/fed-s-best-hope-increasingly-looks-like-a-semi-hard-landing-1.1743720\">told<\/a> Bloomberg that the best hope might be \u201ca semi-hard landing.\u201d<\/span><\/p>\n<p><span data-contrast=\"auto\">Peter Hooper, the global head of economic research for Deutsche Bank AG, thinks the central bank could avert disaster as a growth recession is more likely to happen.<\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><span data-contrast=\"auto\">This is when the economy expands more slowly than the long-term trend of 2 percent and unemployment edges higher, but a contraction is ultimately avoided.\u00a0<\/span><span data-ccp-props=\"{\" 201341983=\"201341983\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">U.S. financial markets suffered their worst single-session slide since 2020 Friday as the leading benchmark indexes declined by double digits. Energy commodities, the metals market, and cryptocurrencies also tumbled. The greenback, a traditional safe-haven asset in times of market chaos, maintained its strong start to 2022, with the U.S. Dollar Index (DXY) topping the 101.00 threshold to finish the trading week.<\/span><\/p>\n<p>Overall, 44 percent of retail investors think the stock market is heading in a bearish direction, according to a weekly <a href=\"https:\/\/www.aaii.com\/sentimentsurvey\">sentiment gauge<\/a> from the American Association of Individual Investors (AAII).<\/p>\n<div class=\"author_wrapper\">\n<div class=\"one_author_block round\">\n<div class=\"top_row\">\n\t\t\t\t\t<a href=\"https:\/\/www.theepochtimes.com\/author-andrew-moran\"><img decoding=\"async\" src=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-content\/uploads\/2022\/01\/WEB_AndrewMoran.jpeg\" alt=\"Andrew Moran\" \/><\/a><\/p>\n<p>Follow<\/p>\n<\/div>\n<p>Andrew Moran covers business, economics, and finance. He has been a writer and reporter for more than a decade in Toronto, with bylines on Liberty Nation, Digital Journal, and Career Addict. He is also the author of &#8220;The War on Cash.&#8221;<\/p>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Waning optimism over global economic growth prospects and rising stagflation fears have prompted investors to seek shelter in investment hedges.Earlier this month, the Bank of America\u2019s (BofA) monthly<\/p>\n","protected":false},"author":498,"featured_media":1897474,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1452883","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"fifu_image_url":"https:\/\/cndimages.nyc3.digitaloceanspaces.com\/breaking-news\/wp-content\/uploads\/2021\/01\/IMG_2758-scaled-1.jpg","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1452883","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/498"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1452883"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1452883\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/1897474"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1452883"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1452883"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1452883"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}