Stagflation spectre looms but real assets shunned

Fund managers cannot agree on whether stagflation is the next threat to the UK recovery and are adopting radically different strategies to protect portfolios in a higher inflation, low growth environment.

Most agreed investors should avoid traditional hedges against inflation, in particular gold, due to the soaring prices seen recently. Both UK inflation and GDP figures shocked analysts in the past few weeks, with the former reaching 3.7%, while economic growth contracted 0.5% in Q4, the first time since 2009. PSigma's Bill Mott, OMAM's Simon Murphy and Cazenove's Marcus Brookes said stagflation is not a problem in the UK, but Mott warned emerging markets are heading towards a period of stagflation comparable to the UK in the 1970s, which will have a knock-on effect on the global econo...