Investors must act to mitigate the risk of stagflation, warns deVere Ceo Nigel Green.
Major central banks, including the US Federal Reserve and the Bank of England, have both moved to raise interest rates in a bid to tackle rising inflation. However, it has stoked concerns that economies are moving towards a period of stagflation.
Green says: “The central banks are close to running out of tools to try and tackle persistent inflation and falling GDP growth. We should prepare to once again see the ghost of stagflation, something policymakers were hoping we would never return to after the 1970s.
“As central bankers continue their efforts, we can expect stock markets to remain highly volatile as headwinds continue, including lockdowns in China disrupting global supply chains further with major sell-offs still on the cards.”
However, Green believes many investors will be seeking out the potentially hugely-rewarding buying opportunities that the turbulence presents.
He comments: “They’re moving to pick up some high quality stocks that have a solid future at what they will see as ‘discounted prices.’ Savvy investors are staying invested and in fact, increasing investments and are not paying attention to or spooked by short-term fluctuations and headlines.”
Green says diversification, with a mix of asset classes, sectors, regions and currencies, offers investors the best form of protection from market shocks.
“Stagflation can be viewed as a ‘worst of both worlds’ scenario but there are enormous opportunities right now too for investors,” he adds.
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