Stock exchanges and government bonds again face the spectre of global stagflation

It is a divergence that also emerges from medium- to long-term inflation expectations: in the United States, the 5y5y has returned to the 2.3% area, down about 20 basis points since the beginning of the year, showing signs of cooling, while in the Eurozone - albeit at slightly lower levels, around 2.1% - there has been a rise of more than 10 basis points in recent weeks. This movement signals that in the US the market is beginning to anticipate a slowdown in demand, while in Europe the risk of an energy-related price shock prevails.

'This time the ECB appears more ready to act than in the past, while the Fed can afford to wait,' adds Cesarano. A divergence that could also be reflected in the foreign exchange market: 'The dollar could return to being driven by the rate differential in the coming weeks rather than by the safe haven function, should the ground attack hypothesis prevail. Under this condition, a temporary rebound of the euro/dollar towards the 1.18/1.20 area is possible'.

While the macro picture remains uncertain, investor behaviour also reflects this transitional phase. Large institutional investors need confirmation before significantly redefining portfolios. This is why the coming weeks will be decisive: clear signals will be needed on whether to increase exposure to more resilient assets in a stagflationary scenario or continue to price in a more benign soft landing or reflationary scenario.

"The impact of the conflict on the energy sector is such that it justifies the possibility of a stagflationary scenario in the coming months," notes Luca De Biasi, ceo of Mercer Italia sim. "If the conflict is not resolved quickly, it is plausible to expect even higher oil prices. This, combined with the already high level of natural gas in Europe, is likely to further fuel price pressures.

The central issue concerns the transmission of these shocks along the production chain. "Persistent high energy prices can trigger an inflationary spiral that is difficult to reverse. Firms tend not to reduce prices once they have risen, creating lasting effects on inflation'. A dynamic that closely recalls what happened in the 1970s. A scenario that remains open, but whose probability increases as high energy prices persist.

For investors, this translates into a complex environment in which traditional diversifications work less. "In a stagflationary regime, there are few asset classes in which to take refuge," explains De Biasi. "Real assets such as commodities, infrastructure and real estate tend to defend purchasing power better over time.

Alongside these, gold returns as a benchmark, while on the bond component, a flexible approach becomes useful, with a combination of short and long maturities in a context of flattened or inverted curves. On the equity front, on the other hand, selection becomes decisive, favouring companies with high pricing power.

It is no coincidence that, in the 1970s, the portfolio that best withstood stagflation consisted of gold, utilities, consumer staples, and securities of companies that were able to pass on the rise in costs to consumers while preserving margins.

The attempted rebound of the markets, therefore, looks more like a truce than a solution. The real game will be played on the evolution of commodities and the ability of economies to absorb a prolonged energy shock. The relative behaviour of oil and copper, more than any other indicator, will continue to offer a compass for navigating between opposing scenarios. And, for now, the risk that the market is moving back towards stagflation cannot be underestimated.