More than 20% of global investors expect global stagflation after winning the trump in US elections, according to BofA. Stagflationary expectations reached a 4-year-old peaks of inflation — the 12-year-old
One in five investors expects global stagflation over the next 12 months after the victory of Republican Donald trump in the presidential election in the United States. To such conclusion the Bank of America Merrill Lynch survey of 177 portfolio managers controlling assets of $456 billion. the Survey was conducted from 9 to 14 November (after the announcement of the election results). As noted by the Bank, stagflation expectations have reached four-year peaks.
Stagflation — a situation in which low economic growth or recession is accompanied by inflation and rising unemployment. In November stagflation expected by 22% of investors.
However, expectations for global economic growth over the next 12 months rose from 19% in October to 35% and reached an annual peak. As BofA notes, investors see the election results as a positive factor for the growth of nominal GDP. Similar situation with corporate profits. The share of managers, according to which, the profit for the next 12 months will rise, has increased from 10% in October to 29%, reaching 15-month highs.
Inflation expectations have jumped 70% in October to 85% in November, reaching maximum values in June 2004.
Earlier, Goldman Sachs analysts warned that the implementation of the policy trump associated with trade protectionism (trade policy of restricting the importation of imports and support local production of goods) and the fight against illegal migration, may lead to stagflation in the United States. In this scenario, GDP growth will be 0.8 percentage points below the forecast to 2018-2019, the inflation rate in 2019 will reach 2.3%, and unemployment will rise to 5.3%. In this case, the fed began to aggressively raise rates to combat inflation. Informed about possible stagflation in the United States as a result of the implementation of the policy trump warned the Swiss HSBC.
The majority of investors (84%) believe that protectionism is the main risk to the stability of global financial markets: the percentage of investors who share this opinion, reached a peak in 2009. According to 73% of managers, the most serious threat to financial stability are risks associated with monetary policy, including raising interest rates and volatility in emerging markets. According to 69%, — geopolitical risks. One third of respondents believes that the main threat to financial stability risks associated with emerging markets.
The main “additional risk” (tail risk) the majority of respondents BofA investors (23%) called “stagflation, the collapse of the bond market”. Moreover, BofA notes, “political rhetoric in order to mitigate concerns about market protectionism spurred the appetite for risky assets.”