Thread by @BiIndia

It could be slowflation not #stagflation – and it’s better for the equity markets

businessinsider.in/stock-market/n…

By @jainrounak

With the pandemic & the #RussiaUkraineConflict, global economies have been affected by too many factors that have made central banks alter the course too many times, resulting in confusion over which way the economy will go and the shape of recovery.

#stagflation #RBI

Experts around the world have been worried about #recession and #stagflation — a combination of slow growth, inflation and unemployment. But now, analysts at UBS suggest things are looking up, stating that the global economy could be staring at ‘slowflation’ and not stagflation.

‘Slowflation’ refers to a scenario where growth and inflation coexist, but growth remains on the lower end while inflation is on the middle-to-higher end.

“In the next 12-36 months, we believe we are likely to enter a period of slowflation,” stated a report by UBS.

#Slowflation

#Stagflation has also stoked fires of bear market concerns, but the report states that things will ease going forward. While the S&P 500 index has entered bear market territory already and has stayed there for a while, analysts expect the #markets to rebound soon.

As opposed to #stagflation, the equity allocation for a slowflation scenario will be different, with certain sectors expected to grow or rebound faster than others. Energy, materials, utilities and financials carry the highest weights in equity allocation.

.@UBS’ research flies in the face of comments from economists like Mohamed El-Erian, who said “stagflation is unavoidable”. HUL chief’s warnings, too, sound ominous, regardless of how the equity markets perform.

fortune.com/2022/05/18/rec…

It remains to be seen how economies around the world respond to #interestrate hikes but growth could be higher than expected too — as many sectors look at a rebound from the #pandemic.

#stagflation