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Could the ‘ghost of stagflation’ provide an opportunity for investors?

By Jon Bragg

May 10 2022
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Could the ‘ghost of stagflation’ provide an opportunity for investors?

By Jon Bragg
May 10 2022

Investors should ensure they are well diversified as market volatility persists, according to deVere’s Nigel Green.

Could the ‘ghost of stagflation’ provide an opportunity for investors?

By Jon Bragg

May 10 2022
Share

Investors should ensure they are well diversified as market volatility persists, according to deVere’s Nigel Green.

deVere Group CEO Nigel Green has suggested that “enormous opportunities” are available to investors who are adequately diversified as the ghost of stagnation looms.

With central banks including the Reserve Bank (RBA) now starting to tighten interest rates, Mr Green highlighted the importance of having proper strategies in place to help mitigate risk.

“The central banks are close to running out of tools to try and tackle persistent inflation and falling GDP growth,” said Mr Green.

“We should prepare to once again see the ghost of stagflation – something policymakers were hoping we would never return to after the 1970s, when higher consumer prices fed into wages as workers demanded higher wages to match price increases.”

State Street recently identified a surge in the topic of stagflation worldwide across investor research, news and company filings.

Fears were further stoked after the Australian Bureau of Statistics (ABS) reported that the annual pace of inflation reached 5.1 per cent during the March quarter while underlying inflation sat at 3.7 per cent.

Moving forward, Mr Green said that high volatility was expected to continue and warned that major sell offs would remain on the cards, particularly as supply chain disruptions and other ongoing headwinds persist.

“However, working with a good adviser, many investors will be seeking out the potentially hugely rewarding buying opportunities that are being presented by this turbulence,” he noted.

“They’re moving to pick up some high-quality stocks that have a solid future at what they will see as ‘discounted prices.’ They will not want to miss out. After all, there are always winners and losers in bouts of volatility – and this is where a good fund manager comes in.”

Rather than being spooked by developments over the shorter term, Mr Green encouraged investors to be diversified through a considered mix of asset classes, sectors, regions and currencies that offer 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 added.

“Don’t be one of those investors who sit on the sidelines right now.”

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