The ghost of stagflation is once again looming on the horizon, and investors should make sure their personal financial planning strategies are such to mitigate risk but still build and grow wealth for the longer-term, says a leading independent financial advisor.
Stagflation is a period when slow economic growth and joblessness coincide with rising inflation.
Nigel Green, CEO and founder of deVere Group, said that major central banks, including the U.S. Federal Reserve and the Bank of England, are raising interest rates to battle skyrocket inflation.
“The central banks are close to running out of tools to try and tackle persistent inflation and falling GDP growth,” explained 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.”
Green added that as central bankers continue their efforts, stock markets are expected 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, many investors will be seeking out the potentially hugely rewarding buying opportunities that are being presented by this turbulence,” said Green.
“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.”
As markets began the sell-off on Thursday, Green noted that savvy investors are staying invested and, in fact, increasing investments, not paying attention to or spooked by short-term fluctuations and headlines.
He urged investors to ensure their portfolio is adequately diversified.
“A considered mix of asset classes, sectors, regions and currencies offers 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,” Green said.
“Don’t be one of those investors who sits on the sidelines right now.”