over 2 years ago • 1 min
As inflation picks up rapidly just as key economic indicators weaken, talk of “stagflation” – the dreaded combination of economic stagnation and high inflation – is soaring.
The chart shows mentions of “stagflation” in news articles, as tracked by Bloomberg. More than 800 articles last week mentioned the term, the most in at least a decade.
As we head towards the end of the year, the initial economic euphoria that greeted the easing of pandemic lockdown restrictions in many parts of the world is starting to cool. At the same time, supply chain disruptions are helping push up the price of goods and boosting expectations of runaway inflation.
We have to go all the way back to the 1970s to find the last period of sustained stagflation in North America or Western Europe. And, worryingly, weak economic growth and spiralling prices for day-to-day goods is the worst possible combination for investors – undermining the value of both stocks and bonds.
Still, stagflation concerns don’t for now seem to have broken out of the media and pierced the wider public consciousness. Check out this chart of Google searches for the term, which are in line with their five-year average.
Investors should hope the media is overreacting. After all, if the clogs in the global supply chain can be cleared in coming months it’ll both bring down inflation and goose the economy. Fingers crossed!
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.