Do you see fear of stagflation on stock markets?

In the face of rising energy and food prices and the first signs of an economic slowdown, stock exchanges on both sides of the ocean are recording significant drops. Are investors already showing their fear of the specter of stagflation in this way?

Stagflation occurs when prices rise and the economy stops growing. Already a few months ago, at the beginning of 2021, analysts warned against such a scenario. In stagflation, consumers have to spend more and more money on fuel, because oil is more expensive, and on heating their apartments or houses, because gas, coal and wood prices are rising. Food prices are also rising. Behind the increases in the prices of goods, the so-called basic necessities did not keep pace with wage increases. Hence, people begin to cut back on other spending, and as consumption fades, the prospects for economic growth are reversed. This, in turn, may adversely affect, inter alia, on the projection of the results of listed companies, and thus on the current index quotations.

Stock declines and waiting for the PMI

Did we observe the announcement of such a trend on Monday? On that day, the Wall Street stock market closed in the red, Dow Jones index fell by over 300 points, S & P 500 by over 1,5%, a Nasdaq by over 2%, reaching the lowest level since June. On the first day of the week, the European stock markets were also losing, and the Frankfurt stock markets DAX for example, it fell by nearly 1%, to the lowest level in five months.

It seems that Europe, right after China, may begin to slow down the economy, along with the inflation records that may fall this winter. The PMI indicators, which we will get to know at the end of the year, will tell more about this. You have to take into account that, like in China, the readings may fall below the symbolic level of 50 points, separating the increase from the regress.

Oil becomes more expensive, OPEC + implements the plan

WTI oil barrel it went up to nearly $ 78 on Monday, the highest level since November 2014. It happened right after the decision OPEC + on maintaining the increase of the oil production limit by 400 thousand tonnes planned for November barrels a day.

The pressure from the recipients of the raw material to increase production above the planned value and thus stabilize prices was for nothing. OPEC + is consistently implementing the agreement approved in July to increase production by 400 thousand tonnes every month. barrels per day, at least until April 2022

This seems to be another piece of the stagflation puzzle, because without a decline in energy commodity prices it may be difficult to avert the risk of stagflation during the upcoming and possibly economically difficult winter