Following Brexit the term “stagflation” has reared its head, but what is it, what signs should investors look for and how will it affect different investments?
While no-one can say for a fact what the economic fallout of the UK’s vote to leave the European Union will be, the prospect of “stagflation” has been floated as the economy faces an uncertain future.
Uncertainty is the market’s biggest foe, but investors can protect themselves by improving their understanding of the UK economy and remembering that diversifying portfolios, by holding many different assets, offers the best opportunity to ride out any potential storm.
What is stagflation?
Stagflation is a description of an economy in trouble. It is a portmanteau of stagnation and inflation.
It is the term used to describe periods of persistently high inflation – the cost of goods rising – combined with high unemployment and stagnant demand or low economic growth.