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Everyone seems worried about it. Credit: Bloomberg.
Wherever you fall on the debate, alarm bells are ringing as energy prices head toward multiyear highs and persistent shortages crimp supply chains worldwide. Prices of coal and natural gas have also jumped, with demand ahead of winter whittling worldwide stockpiles.
The commodity surge has thrust stagflation fears front-and-centre in markets, given that higher energy prices have the potential to pinch consumers, according to Principal Global Investors. Gains in consumer spending are already expected to slow, leading Goldman economists to slash US growth estimates over the weekend. Sky-high commodity prices have filtered through to the Treasury market, where yields on benchmark year notes broke above 1.
Driving the gain is an increase in break-even inflation rates, while so-called real yields - often viewed as a proxy of growth expectations - have retreated so far this month. Morgan Stanley strategist Andrew Sheets disagrees.
Break-even rates are still below their May peaks, while the cross-asset landscape is distinct from the stagflationary setup of the s, he argued. Data compiled by Bloomberg shows gross domestic product is forecast by economists to rise 5. Equity investors so far seem unperturbed.
However, the mood music could change as the third-quarter reporting season kicks off and corporate executives sound off on supply chain issues and rising input costs, he said. So far, balance sheets have been resilient. Equity investors are so far unperturbed, but the mood could change the mood could change as the third-quarter reporting season kicks off and corporate executives sound off on supply chain issues and rising costs.
Credit: NYSE. But should stagflation fears start to meaningfully rattle equity markets, shares of companies with higher pricing power - the ability to pass on costs - should profit, according to Goldman, after several weeks of underperformance.
Kostin wrote. The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. up to get it every weekday morning.
A full-blown Wall Street obsession: Stagflation fears grip markets. Please try again later. The Sydney Morning Herald. By Katie Greifeld October 15, — 5. Save Log inregister or subscribe to save articles for later. Normal text size Larger text size Very large text size. Bloomberg The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion.
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