Stagflation: the mistakes not to make

Stagnation plus inflation. A deadly combination for world economies.

As usual, the alarm is raised by the financial detectors of the United States. The term stagflation, in fact, means that nominal and conceptual agglutination with which the situation is given a name for which prices increase and there is however stagnation.

At the moment this is just an alarm. But it was given. The insistence of the flat rates that they detect. They come down. And they do it very quickly. And this is how investors fear the surge in inflation. The fear is due to the fact that, if the incoming phenomenon is confirmed, we will have to think about policies to reduce the mass of circulating money. The consequence is the restriction of the demand for goods and services. This is still the cause of the decline in the desire for business. The economy is decreasing and in a phase of recovery from the great depression due to the pandemic this is a phenomenon to be avoided.

Markets slowing down

The markets appear disoriented, while the investor must know how to position his portfolio, keeping in mind a couple of considerations to avoid misjudgment. For a year, equity markets have been on autopilot, extraordinarily expansive fiscal and monetary policies, an end to the pandemic within reach and a very strong economic recovery, have created the conditions for a steady, inexorable and seemingly endless rally. However, something seems to have jammed in the mechanism of the rise.