Bank of America warns after Donald Trump’s victory in the presidential election, over 20% of international investors are expecting stagflation in the global economy in the near future.
To be more specific, the recent survey conducted by the bank shows that 20% of 177 portfolio managers running over 456 billion dollars in assets assume that the global economy is going to fall into stagflation within the next 12 months.
At the same time, the bank representatives underline that today’s expectations of stagflation in the global economy have reached a new 4-year high. For those of you who don’t know, stagflation is an economic situation when zero or little economic growth comes hand in hand with rising unemployment and inflation.
Economic Growth Expectations Rise As Well, Survey Says
At the same time, the expectations of a stronger global economy within the next 12 months have risen as well. While the amount of investors anticipating a stronger economy used to be 1% in October 2016, now has gone all the way up to a stunning 35%, which is a new record high.
Bank of America explains that the results of the recent U.S. presidential election are seen as a positive factor for the global economy. The same holds true for corporate incomes. In October, 10% of the respondents used to expect higher corporate incomes in the USA. Now, it’s 29% of the respondents who think so. As for inflation expectations, they have risen all the way up to 85% since October, when the figures were around 70%.
At the same time, another major American bank, which is Goldman Sachs, says that Trump’s protectionism policy may well trigger stagflation in the American economy in the near future. For those of you who don’t know, Trump’s trade protectionism policy implies supporting American producers and capping imports amid war on illegal immigration. If Donald Trump really puts into practice everything he promised during the presidential campaign, the expert say that the U.S. GDP may well shrink by 0.8% against the 2017-2019 forecast. At the same time, the rate of unemployment and inflation may rise to 5.3% and 2,3% respectively. If that’s the case, the Fed is likely to fight higher inflation above the target level by aggressive interest rate hikes.
