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Market Watch - 'Real Wealth Destruction': This Deutsche Bank Chart Shows What Could Happen to Assets in a Repeat of the Stagflationary 1970s.

May 26, 2022
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Article by Barbara Kollmeyer in Market Watch

While the decade is still young, if inflation sticks around for the next few years, things could get pretty ugly for investors.

That’s according to this chart from Deutsche Bank, which shows how a range of assets performed during the disco and stagflation days of the 1970s.

DEUTSCHE BANK

While history never exactly repeats, Deutsche Bank strategists were aiming to offer a framework to clients on how to think about the next few years if inflation stays high even after a Fed-induced recession.

“The short answer is that for traditional financial assets like bonds and equities you would expect real wealth destruction rather than the massive real wealth creation seen over the last four decades,” the bank’s strategists Jim Reid and Henry Allen, told clients in a note on Tuesday.

Commodities would likely be a better bet, although given the run up already seen so far this decade, the easy gains have perhaps been made, they noted.

“However, gold and silver haven’t made much progress over the last two years so if the playbook follows the 1970s they are the standout cheap asset from this starting point,” said the strategists.

Fallout from the COVID pandemic and Russia’s invasion of Ukraine has driven supply chain woes and shortages of key commodities. Concerns that central banks may not get inflation under control has taken Wall Street on .......

To read this article in Market Watch in its entirety, click here.

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