Fears of stagflation are percolating on Wall Street, as investors await data that could shed light on whether the Federal Reserve is succeeding in tamping down inflation without badly hurting growth.
Stagflation — a combination of stagnant growth and persistent inflation that dogged the US in the 1970s — dims the appeal of both equities and bonds, leaving investors fewer places to earn returns.
While far from assured, the scenario has loomed large in investors' minds as last year’s inflation surge forced the Fed to launch an aggressive monetary policy tightening cycle that many expect to bring on a recession.
Some also believe the recent banking sector tumult will hurt lending and further constrain growth, forcing the Fed to cut rates before inflation is tamed.
April’s survey of global fund managers from BoFA Global Research showed stagflation expectations near historical highs, with 86 per cent saying it will be part of the macroeconomic backdrop in 2024.
Next week’s consumer price data for April, due on Wednesday, could offer a clearer picture of whether the Fed’s interest rate increases are cooling inflation. A strong number could weigh on a rally that has lifted the S&P 500 nearly 8 per cent this year.
“Stagflation is a growing concern,” said Phil Orlando, chief equity market strategist at Federated Hermes.
“Inflation is a lot higher than the Fed thought it would be, and it’s coming down at an extraordinarily slow pace while we think the economy has already hit its high water mark for the year.”
US employment data on Friday showed hourly wages grew in April at an annual rate of 4.4 per cent, too strong to be consistent with the Fed's 2 per cent inflation target. Growth remained robust, however, with job creation accelerating and the unemployment rate falling to a 53-year low.
Still, bets in futures markets continued to show traders pricing interest rate cuts later this year. Policymakers have insisted they will keep rates at around current level for the remainder of 2023 after raising them another 25 basis points this week.
Jose Torres, senior economist at Interactive Brokers, believes the US will fall into recession later this year. Factors including higher commodity prices and a shift to local supply chains from global ones are likely to keep inflation elevated even as growth declines, Mr Torres said.
He has become more bullish on dividend paying stocks in sectors such as utilities, expecting the extra income to buttress returns as inflation weighs on equity valuations and the S&P 500 treads water.
"The Fed made the mistake of being too accommodative for too long,” Mr Torres said. “It will take more time than the market expects to get the US back to being a 2 per cent inflation country.”
Consumer prices rose by 5 per cent in March, far above levels seen over most of the past decade though down from last June's peak of 9.1 per cent. US economic growth slowed more than expected in the first quarter, while activity in the manufacturing sector remained depressed last month.
Past episodes of stagflation have weighed on stocks. The S&P 500 fell a median of 2.1 per cent during quarters marked by stagflation over the last 60 years, while rising a median 2.5 per cent during all other quarters, according to Goldman Sachs.
Everybody is positioned for the end of the world, but when you know that the Fed is out of the hiking game ... it’s a much sturdier footing for investors than anybody anticipated at this point in 2023
Charlie McElligott,
managing director of cross-asset macro strategy at Nomura Securities
Quincy Krosby, chief global strategist at LPL Financial, has been buying gold. Prices for the metal, a popular inflation hedge and haven during uncertain times, have surged to a near record high this year, lifted by geopolitical worries and a looming showdown over the US debt ceiling.
"It looks to me that gold is sniffing out a tinge of stagflation,” said Ms Krosby, who has also added positions to equity sectors she expects to better weather economic turbulence, such as consumer staples.
Other investors were more optimistic, believing growth will hold up.
Charlie McElligott, managing director of cross-asset macro strategy at Nomura Securities, pointed to the Atlanta Fed's GDPNow estimate, which is projecting a 2.7 per cent growth rate in the second quarter, up from 1.8 per cent on May 1.
At the same time, expectations that the Fed is unlikely to raise rates much higher has created a better backdrop for investors, he said.
"Everybody is positioned for the end of the world, but when you know that the Fed is out of the hiking game ... it’s a much sturdier footing for investors than anybody anticipated at this point in 2023."
Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
Gothia Cup 2025
4,872 matches
1,942 teams
116 pitches
76 nations
26 UAE teams
15 Lebanese teams
2 Kuwaiti teams
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
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Zayed Sustainability Prize
MATCH INFO
Uefa Champions League, Group B
Barcelona v Inter Milan
Camp Nou, Barcelona
Wednesday, 11pm (UAE)
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Most sought after workplace benefits in the UAE
- Flexible work arrangements
- Pension support
- Mental well-being assistance
- Insurance coverage for optical, dental, alternative medicine, cancer screening
- Financial well-being incentives
Killing of Qassem Suleimani
RESULTS
6.30pm: Emirates Holidays Maiden (TB) Dh 82,500 (Dirt) 1,900m
Winner: Lady Snazz, Richard Mullen (jockey), Satish Seemar (trainer).
7.05pm: Arabian Adventures Maiden (TB) Dh 82,500 (D) 1,200m
Winner: Zhou Storm, Connor Beasley, Ali Rashid Al Raihe.
7.40pm: Emirates Skywards Handicap (TB) Dh 82,500 (D) 1,200m
Winner: Rich And Famous, Royston Ffrench, Salem bin Ghadayer.
8.15pm: Emirates Airline Conditions (TB) Dh 120,000 (D) 1,400m
Winner: Rio Angie, Sam Hitchcock, Doug Watson.
8.50pm: Emirates Sky Cargo (TB) Dh 92,500 (D) 1,400m
Winner: Kinver Edge, Richard Mullen, Satish Seemar.
9.15pm: Emirates.com (TB) Dh 95,000 (D) 2,000m
Winner: Firnas, Xavier Ziani, Salem bin Ghadayer.
RESULT
Huddersfield Town 1 Manchester City 2
Huddersfield: Otamendi (45' 1 og), van La Parra (red card 90' 6)
Man City: Agüero (47' pen), Sterling (84')
Man of the match: Christopher Schindler (Huddersfield Town)
What are NFTs?
Are non-fungible tokens a currency, asset, or a licensing instrument? Arnab Das, global market strategist EMEA at Invesco, says they are mix of all of three.
You can buy, hold and use NFTs just like US dollars and Bitcoins. “They can appreciate in value and even produce cash flows.”
However, while money is fungible, NFTs are not. “One Bitcoin, dollar, euro or dirham is largely indistinguishable from the next. Nothing ties a dollar bill to a particular owner, for example. Nor does it tie you to to any goods, services or assets you bought with that currency. In contrast, NFTs confer specific ownership,” Mr Das says.
This makes NFTs closer to a piece of intellectual property such as a work of art or licence, as you can claim royalties or profit by exchanging it at a higher value later, Mr Das says. “They could provide a sustainable income stream.”
This income will depend on future demand and use, which makes NFTs difficult to value. “However, there is a credible use case for many forms of intellectual property, notably art, songs, videos,” Mr Das says.
The National in Davos
We are bringing you the inside story from the World Economic Forum's Annual Meeting in Davos, a gathering of hundreds of world leaders, top executives and billionaires.
Other promotions
- Deliveroo will team up with Pineapple Express to offer customers near JLT a special treat: free banana caramel dessert with all orders on January 26
- Jones the Grocer will have their limited edition Australia Day menu available until the end of the month (January 31)
- Australian Vet in Abu Dhabi (with locations in Khalifa City A and Reem Island) will have a 15 per cent off all store items (excluding medications)
UAE currency: the story behind the money in your pockets
Electric scooters: some rules to remember
- Riders must be 14-years-old or over
- Wear a protective helmet
- Park the electric scooter in designated parking lots (if any)
- Do not leave electric scooter in locations that obstruct traffic or pedestrians
- Solo riders only, no passengers allowed
- Do not drive outside designated lanes
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Pharaoh's curse
British aristocrat Lord Carnarvon, who funded the expedition to find the Tutankhamun tomb, died in a Cairo hotel four months after the crypt was opened.
He had been in poor health for many years after a car crash, and a mosquito bite made worse by a shaving cut led to blood poisoning and pneumonia.
Reports at the time said Lord Carnarvon suffered from “pain as the inflammation affected the nasal passages and eyes”.
Decades later, scientists contended he had died of aspergillosis after inhaling spores of the fungus aspergillus in the tomb, which can lie dormant for months. The fact several others who entered were also found dead withiin a short time led to the myth of the curse.
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
Killing of Qassem Suleimani
The specs: 2018 BMW R nineT Scrambler
Price, base / as tested Dh57,000
Engine 1,170cc air/oil-cooled flat twin four-stroke engine
Transmission Six-speed gearbox
Power 110hp) @ 7,750rpm
Torque 116Nm @ 6,000rpm
Fuel economy, combined 5.3L / 100km
SPECS%3A%20Polestar%203
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3ELong-range%20dual%20motor%20with%20400V%20battery%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E360kW%20%2F%20483bhp%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E840Nm%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESingle-speed%20automatic%3Cbr%3E%3Cstrong%3EMax%20touring%20range%3A%3C%2Fstrong%3E%20628km%3Cbr%3E%3Cstrong%3E0-100km%2Fh%3A%3C%2Fstrong%3E%204.7sec%3Cbr%3E%3Cstrong%3ETop%20speed%3A%3C%2Fstrong%3E%20210kph%20%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh360%2C000%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ESeptember%3Cbr%3E%3C%2Fp%3E%0A
Fight card
1. Bantamweight: Victor Nunes (BRA) v Siyovush Gulmamadov (TJK)
2. Featherweight: Hussein Salim (IRQ) v Shakhriyor Juraev (UZB)
3. Catchweight 80kg: Rashed Dawood (UAE) v Khamza Yamadaev (RUS)
4. Lightweight: Ho Taek-oh (KOR) v Ronald Girones (CUB)
5. Lightweight: Arthur Zaynukov (RUS) v Damien Lapilus (FRA)
6. Bantamweight: Vinicius de Oliveira (BRA) v Furkatbek Yokubov (RUS)
7. Featherweight: Movlid Khaybulaev (RUS) v Zaka Fatullazade (AZE)
8. Flyweight: Shannon Ross (TUR) v Donovon Freelow (USA)
9. Lightweight: Mohammad Yahya (UAE) v Dan Collins (GBR)
10. Catchweight 73kg: Islam Mamedov (RUS) v Martun Mezhulmyan (ARM)
11. Bantamweight World title: Jaures Dea (CAM) v Xavier Alaoui (MAR)
12. Flyweight World title: Manon Fiorot (FRA) v Gabriela Campo (ARG)
Killing of Qassem Suleimani
Graduated from the American University of Sharjah
She is the eldest of three brothers and two sisters
Has helped solve 15 cases of electric shocks
Enjoys travelling, reading and horse riding
The specs
Engine: 2.0-litre 4-cyl turbo
Power: 201hp at 5,200rpm
Torque: 320Nm at 1,750-4,000rpm
Transmission: 6-speed auto
Fuel consumption: 8.7L/100km
Price: Dh133,900
On sale: now
