Once described by a former British Chancellor of the Exchequer as “the worst of both worlds”1, ‘stagflation’ was a little-known term outside of academia and the asset management industry.
Defined as a period of slow economic growth or stagnation coupled with high inflation, this painful economic condition hasn’t been experienced for many years. Even after the Global Financial Crisis, there was very little inflation to speak of2 and economic growth was relatively healthy, even if not particularly strong3.
But the changing economic backdrop of late is sparking fears that a stagflationary environment is on the horizon once again. Around two-thirds (65%) of respondents to a recent Natixis survey highlight it as a concern4.
Fund managers are also getting nervous about its spectre. In March, some 88% of respondents to the Bank of America’s keenly watched Fund Manager Survey predicted a stagflation environment for markets in the coming 12 months5.