Inflation is already at multi-decade highs in the US and UK, and in Europe, inflation is at a record high. Consumer prices are expected to rise further still as the war in Ukraine pushes up the prices of oil, gas, wheat and other commodities, which threatens consumer spending. The lockdowns in China’s economic hubs will delay shipments of vital goods, placing additional constraints on global supply chains and placing further upward pressure on consumer prices.
Global stock markets have regained some sense of calm after a tumultuous month in March, but government bond markets are flashing warning signs about the growing risks of stagflation. Level-headed investors should heed these warnings and take action now to navigate what is turning out to be a turbulent year.
Stagflation is a debilitating combination of persistently high inflation with low economic growth, and the evidence suggests that stagflationary dynamics will dog the global economy for longer than some investors expect.
