The ghost of stagflation is once again looming on the horizon, and you should make sure that your current personal financial planning strategies are such that you can mitigate risk but still build and grow wealth for the longer-term.
This is the message Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory organizations, is briefing clients.
It comes as major central banks, including the U.S. Federal Reserve and the Bank of England, are raising interest rates to battle skyrocketing inflation.
Stagflation is a period when slow economic growth and joblessness coincide with rising inflation.
He says: “The central banks are close to running out of tools to try and tackle persistent inflation and falling GDP growth.
“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.”
He continues: “As central bankers continue their efforts, we can expect stock markets to remain highly volatile as headwinds continue, including lockdowns in China disrupting global supply chains further, with major sell-offs still on the cards, as we saw on Thursday.
“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.
“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 yesterday, Nigel Green told the media: “Savvy investors are staying invested and, in fact, increasing investments and are not paying attention to or spooked by short-term fluctuations and headlines.”
As ever, he urges that investors ensure that the portfolio is adequately diversified. “A considered mix of asset classes, sectors, regions and currencies offers protection from market shocks.”
He concludes: “Stagflation can be viewed as a ‘worst of both worlds’ scenario. But there are enormous opportunities right now too for investors.
“Don’t be one of those investors who sit on the sidelines right now.”