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Will Economic Stagnation Lead To Stagflation? - Hirayama Investments

Posted by Seton McAndrews | CFP®, Vice President Investments
November 7, 2012

Richard Hirayama, portfolio manager of the Wentworth Hauser International Equity strategy, examines central bank actions and what it could lead to. "The world has benefited substantially from three decades of declining inflation which reduced costs and stimulated economic growth. However, synchronized credit creation and money printing by the major central banks may ignite inflationary forces similar to the 1960’s and 1970’s. Stagnant subpar global economic growth of 3-3.5% in an environment of rising inflation expectations could breed stagflation. The central banks would almost certainly not permit inflation to rise above 4-5% for a sustained period of time but an inflation advance from 2% to 3% is a 50% increase which could motivate investors to seek out inflation-hedging assets such as equities and WHV’s energy and materials investments for potential protection against purchasing power degradation and paper money devaluation."

Wentworth, Hauser & Violich