DeVere Group: Stagflation-proof your investments now
Investors should be ‘stagflation-proofing’ their investments now, warns Nigel Green, CEO of DeVere Group.
The comment comes as fresh business surveys across major economies point to slowing growth alongside persistent inflation pressures, reinforcing concerns that the global economy is edging toward a sustained stagflationary phase, even as equity markets continue to push to record highs.
The S&P 500 closed at a record 7,022 last week, while the Nasdaq Composite ended at an all-time high of 24,016, underlining the gap between buoyant markets and a more fragile macro backdrop.
He says: 'Stagflation is a damaging combination of weak economic growth and elevated inflation. It erodes real returns across asset classes and creates a far more complex backdrop for investors than a typical cycle. Markets are performing strongly, but the conditions that typically precede more difficult real returns are quietly building.'
Recent PMI data across Europe shows activity close to stagnation, while cost pressures remain elevated, driven in part by ongoing instability in energy markets linked to tensions involving Iran.
The flash eurozone composite PMI fell to 50.5 in March from 51.9 in February, a 10-month low, before the final reading was revised only marginally to 50.7. Oil price volatility continues to feed through supply chains, lifting input costs globally even as demand softens.
The deVere CEO comments: “Energy is the key to all of this. Higher oil prices are pushing up costs across industries while growth is losing momentum. 'This is the defining feature of a 1970’s-style stagflationary environment, even if headline markets are not yet reflecting it.'Global institutions are already warning about the downside risks. The International Monetary Fund (IMF) has flagged scenarios that include near-recession conditions, highlighting how difficult it will be to restore growth without reigniting inflation.
In its April World Economic Outlook, the IMF said global growth is projected at 3.1% in 2026 and 3.2% in 2027 under its reference case, while its severe scenario points to the world economy moving to the brink of recession, with oil averaging $110 a barrel this year and $125 next year. Policymakers face limited room for manoeuvre, with rate decisions constrained by conflicting pressures.
'Central banks are in a difficult position. Supporting growth risks fuelling inflation, while holding policy tight risks deepening the slowdown. The tension is feeding volatility across markets, even as indices continue to climb,' notes Nigel Green.
Equities are beginning to reflect these pressures. Corporate margins are being squeezed by rising input costs, while consumers show increasing sensitivity to price rises. Market performance, while strong, is becoming more uneven, with rallies failing to build sustained momentum beneath the surface.
He says: 'Investors should expect markets to be in a period of volatility and range-bound trading rather than a consistent upward trend. Strong headline performance can mask weaker underlying dynamics and reduced real returns.'
Traditional portfolio strategies are under strain. Bonds are struggling to deliver real returns in an inflationary environment, while cash continues to lose purchasing power over time.
He says: 'The conventional balance between equities, bonds and cash is less effective in this cycle. Investors need to think more carefully about how returns are generated, not just where capital is allocated, particularly as inflation reduces the real value of gains.'
Assets linked to real economic activity are gaining prominence. Energy producers, commodity-linked equities and companies with strong pricing power are seen as better positioned to withstand persistent inflation.
Brent crude surged to a peak of around $118 a barrel in March, later eased back toward $95 after a ceasefire, and then moved back toward $100 as tensions flared again, keeping energy markets highly sensitive and inflation risks alive.
'Exposure to energy and commodities provides a degree of alignment with inflation dynamics. Businesses with pricing power are better placed to protect margins and maintain earnings stability in an environment where costs remain elevated,' he adds.
Geographical positioning is also becoming more nuanced. Economies tied to global trade and commodity demand, including Australia and parts of Asia, face a mixed outlook shaped by both external demand and imported inflation pressures.
He says: 'Investors need to assess regional exposure carefully. Global pressures are interconnected, and no market is completely shielded from the current dynamics, even if equity markets are currently showing resilience.'
In this environment, strategies designed to operate in less directional markets are attracting attention, including selective use of structured notes. 'Structured notes can play a role in this phase because they allow investors to define outcomes based on specific market conditions. In periods where indices move within ranges, they can help generate returns that are less dependent on outright market direction,' suggests Nigel Green.
Elevated volatility is a key feature of the current environment, driven by shifting inflation expectations, policy uncertainty and geopolitical developments. He says: 'Volatility is higher because markets are reacting more sharply to economic data and geopolitical developments. In certain structured strategies, that volatility can support income generation, provided the risks and returns are clearly understood.'
He stresses that such instruments require careful analysis, particularly around issuer strength, liquidity and payoff structure. With inflation proving persistent and growth forecasts continuing to weaken, the global investment landscape is undergoing a meaningful shift.
'The risk of stagflation is building beneath a strong market backdrop. Investors who recognise the expected change in conditions and adjust their portfolios accordingly are better positioned to protect real value and benefit from what’s likely to become a more demanding period for markets,' concludes Nigel Green.