The fear of the “stagflation” stalks the US before Donald Trump’s tariff policies

The fear of the “stagflation” stalks the US before Donald Trump’s tariff policies

The possible return of the stagflationwhich would press a whole series of assets, it has been indicated periodically in the last 50 years, but it did not materialize as a real threat to investor portfolios.

While economists and portfolio managers are not prepared to affirm that this time is different, The dreaded scenario is presented again as a risk for investors in recent weeksas the perspective of commercial wars and punitive tariffs overshadow the growth prospects of the United States.

What do experts about latent risks think

Stanflation definitely arose as a possibility because we have these policies that could damage consumer demandeven when persistent inflation limits the maneuvering capacity of the Federal Reserve, “said Jack McIntyre, portfolio manager of the Fixed Income Strategies of Global Brandywine.” It is no longer a zero probability scenario, much less. “

An important piece of the puzzle of stagflation – inflation that refuses to cool – was more clearly in early this month, when Government data indicated that consumer prices rose in January to their fastest monthly rate since August 2023, carrying the annual rate to 3%.

The other piece of puzzle, The economic growth of the United States, hangs from a thread, with Trump tariffs threatening to add an inflationary pressure that could tip the balance.

“What worries us more than the risk of inflation is stanflation”Said Tim Urbanowicz, Straight Strategist of Investments of Innovator Capital Management. “You have to deal with that persistent inflation base, but in addition to that, tariffs have the potential to slow down the economy by becoming a tax on consumers and weighing about profits and economic growth.”

A survey conducted on Tuesday by Bank of America among fund managers around the world showed that the proportion of investors waiting -Defined by the bank as a growth below the trend and inflation above- During the next year it was at its highest level in seven months. At the same time, investors remained bulls on the shares, with a commercial war seen as a risk of low probability, the survey showed.

Although at the beginning of February Trump postponed for a month the imposition of new import tariffs from Canada and MexicoIt launched a new 10% tax at all Chinese imports and has announced tariffs on world imports of steel and aluminum.

He also commissioned his economic team to make plans to impose reciprocal tariffs on all countries that tax US imports, and this week said that Plan to introduce a 25% customs tax to imports of cars, semiconductors and pharmaceutical products.

Some investors believe that any blow to the growth derived from tariffs would be temporary.

“On a longer term horizon, tariffs could even encourage growth,” said Maddi Dessner, head of Group Capital Services, because it would boost industries that will benefit from lower world competition. On the other hand, its initial impact could increase prices pressures.

“The truth is that it is probably at some intermediate point,” He said, adding that the tariffs are partly the reason why Capital Group now foresees a 10 -year treasure yields of 3.9% in a 20 -year horizon, compared to a 3.7% forecast last year.

The background of fears to stagflation

Standing emerged as a source of anxiety in 2022, when inflation rates were shot and the prices of actions and bonds collapsedbut that scenario did not materialize since inflation finally cooled and growth remained. Many believe that the American economy will move away from the stagflation again.

The so -called underlying inflation, around 3%, is much lower than in the 1970swhen the underlying annual rate was around 7%. This time, inflation expectations remain “anchored”, Which means that the long -term inflation panorama does not crazy with each new economic dataSaid Evercore Isi in a recent note.

Even so, Mark Zandi, chief economist of Moody’s Analytics, warned that The market could be underestimating the risks of stagflation. The perspective of large -scale deportations of workers without visas or other work documents, another Trump campaign promise, would also envive inflation, he said.

“Tariffs and deportations are a recipe for inflation and harm growth; Both are negative offer shocks, “he said, and added that an increase in the price of crude was a similar blow that contributed to the stagflation of the 1970s.

Guneet Dhingra, head of American fees strategy at BNP Paribas, said whatAnd the market was “complacent” in the last six months, focusing on Trump’s procrequenting policies.

The suspicious investors of the stagflation, he added, could Sell ​​Treasury Bonds Two years, which would probably lose value due to greater inflationand buy 10 -year Treasury bonds that would benefit in a low growth scenario.

The growing interest in gold, which reached another historical maximum on Wednesday, suggests that some investors are worriedsince the metal is one of the few assets that maintain their value in a stagning environment, said Matthew Bartolini, head of Spdr Americas Research at State Street Global Advisors.

The other great winner would be effectiveSaid McIntyre, from Brandywine, but added that for now he refrained from making great changes to fixed income instruments similar to cash. “I still didn’t get to that point,” McIntyre said.

Source: Ambito

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Posts