Trading Concept
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
No Result
View All Result
Trading Concept
No Result
View All Result
Home Trading News

3 investing strategies for navigating stagflation risks, according to analysts

by
November 12, 2021
in Trading News
0
0
SHARES
0
VIEWS
Share on FacebookShare on Twitter

RELATED POSTS

Raising interest rates is the wrong solution to the inflation problem, analyst says

Asia-Pacific markets rise; Reserve Bank of Australia decision ahead

A view from a petrol station shows gas prices over $4, in Arlington-Virginia, United States on October 30, 2021.

Yasin Ozturk | Anadolu Agency | Getty Images

Stagflation fears have plagued investors in recent months, as prices start to rise in an economy that hasn’t quite picked up pace yet. But investors can employ a few strategies to trade around these risks, analysts say.

An economy going through stagflation is one that simultaneously experiences stagnant activity and accelerating inflation. This phenomenon was first recognized in the 1970s when an oil shock led to an extended period of higher prices but sharply falling GDP growth.

Similarly, energy prices have spiked recently, contributing to inflation fears.

In an October report, Morgan Stanley noted that stagflation risks are drawing investor attention, and could stem from a “supply shock.”

“Disruption of global supply chains has caused shortages in areas such as energy and semiconductors. These situations could drag into next year, which would likely keep inflationary pressures high in the short term,” Morgan Stanley analysts wrote.

Stagflation presents a problem for economic policymakers because measures to curb inflation — such as wage and price controls or contractionary monetary policy — may further increase unemployment.

Goldman Sachs also warned in October that stagflation could be bad for stocks.

Below are a few approaches analysts suggest investors can take in navigating stagflation risks.

1. A ‘barbell’ strategy

Morgan Stanley said investors can adopt a barbell strategy and own cheap valuation stocks with high free cash flow and dividends. Free cash flow is a measure of profitability, representing the amount of cash a company generates after accounting for outflows to support spending.

Earlier this year, the investment bank said a barbell strategy can hedge against market pullbacks. This strategy involves being overweight on two distinct groups of stocks to hedge against uncertainty about the market’s next move. The barbell approach goes for the two extremes of high risk and no-risk investing, in trying to straddle a balance between risk and reward.

2. Go for ‘price setters’ and avoid growth stocks

One approach would be investing in companies in upstream production according to Rob Mumford, investment manager of emerging markets equities at Gam Investments.

“The key is to be in price setters, where you don’t want to be really downstream,” he said.

Upstream refers to input materials needed to produce goods, while downstream operations are those closer to the customers, where products get made and distributed.

One example of upstream production would be semiconductor firms, Mumford told CNBC’s “Squawk Box Asia” on Tuesday. Chip prices have shot up this year due to a global shortage affecting everything from cars to consumer electronics.

As for what investors should avoid, Mumford urged caution on growth stocks.

“I do think that growth stocks will be vulnerable, particularly if inflation starts to trend above expectation,” he said.

Growth stocks are stocks that are expected to grow at a rate significantly above the average in the market.

3. Stick to value and cyclical stocks for now

Morgan Stanley said value and cyclical stocks benefit the most when inflation expectations rise. Value stocks are those that appear to be trading below what analysts think they are worth. Cyclical stocks tend to follow economic cycles, rising and falling in tandem with macroeconomic conditions.

“If stagflation risk continues to emerge, a ‘reversal trading’ strategy could stand out in terms of profitability,” the investment bank added. “This would entail buying the worst price laggards from last month, and expecting a price reversal in the following month.”‘

— CNBC’s Jesse Pound contributed to this report.

ShareTweetPin

Related Posts

Raising interest rates is the wrong solution to the inflation problem, analyst says

by
July 5, 2022
0

Raising interest rates to tame demand -- and therefore inflation -- is not the right solution, as high prices have...

Asia-Pacific markets rise; Reserve Bank of Australia decision ahead

by
July 5, 2022
0

SINGAPORE -- Futures in the Asia-Pacific pointed to a mixed open as investors look ahead to the Reserve Bank of...

‘There are no loans for retirement’: Suze Orman warns to avoid these blunders so you can live your best retired life

by
July 5, 2022
0

Motley Fool Suze Orman Says This Is 'the Biggest Financial Mistake Parents Are Making' The 2022 Retirement Confidence Survey by...

Want to know where to invest for the next 10 years? Here’s what the pros suggest

by
July 5, 2022
0

Volatile markets, inflation hitting new highs and the risk of recession are making things tough for investors right now. "Looking...

Wall Street banks name their top global stocks for the second half — and give three over 70% upside

by
July 5, 2022
0

It has been an unforgettable first half for investors -- and not in a good way, as a brutal sell-off...

Next Post

Asia-Pacific stocks rise; JD.com shares in Hong Kong surge following Singles Day shopping event

Investors should check out 3 'super cheap' Chinese infrastructure stocks, says big Asian bank

Leave a Reply Cancel reply

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

email

Get the daily email about stock.

Please Enter Your Email Address:



By opting in you agree to our Privacy Policy. You also agree to receive emails from us and our affiliates. Remember that you can opt-out any time, we hate spam too!

MOST VIEWED

  • Forget Tesla — this auto stock is the one to buy right now, analyst says

    0 shares
    Share 0 Tweet 0
  • WHO says Covid vaccine booster programs will prolong pandemic

    0 shares
    Share 0 Tweet 0
  • Spin or Split? AT&T Has a Big Decision to Make on Discovery Stake.

    0 shares
    Share 0 Tweet 0
  • Here’s how Carl Icahn is positioning for a possible recession in America

    0 shares
    Share 0 Tweet 0
  • Some lawmakers and their families are betting thousands of dollars on crypto

    0 shares
    Share 0 Tweet 0
  • Home
  • Trading News
  • Email Whitelisting
  • Privacy Policy
All rights reserved by tradingconcept.net
No Result
View All Result
  • Email Whitelisting
  • Home
  • Privacy Policy

All rights reserved by www.tradingconcept.net