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What exactly is stagflation, have we entered it and can you invest your way out of it?

We’ve heard a lot about inflation over the past year and with good reason.…
The post What exactly is stagflation, have we entered it and can you invest…



We’ve heard a lot about inflation over the past year and with good reason. In the UK it reached 7% over the year to March and is expected to average 7.4% this year. The prices we are paying for goods and services have leapt noticeably over a relatively short period of time in a way that hasn’t been seen in a generation. And the expectation is that we can expect more price rises to come with the war in Ukraine contributing to higher energy, commodity and food prices.

At the same time, global growth is slowing. In its half-yearly update issued last week, the IMF said prospects had worsened “significantly” in the past three months and revised its growth estimate for 2022 down from 4.4% to 3.6%.

The fund said every single G7 member and the bigger developing countries would have less economic growth this year than previously expected. And that there was a strong risk of an even worse outcome. Pierre-Olivier Gourinchas, the IMF’s director of research and economic counsellor stated:

“In the matter of a few weeks, the world has yet again experienced a major, transformative shock. Just as a durable recovery from the pandemic-induced global economic collapse appeared in sight, the war has created the very real prospect that a large part of the recent gains will be erased.”

This year the UK economy is expected to be among the least badly hit with the IMF  forecasting 3.7% growth down from a pre-war estimate of 4.7%. The USA is expected to experience a similar level of growth. However, the situation in the UK is tipped to deteriorate next year when GDP is expected to grow at a rate of just 1.2%.

While that is still growth, it is growth with a weak pulse and would leave the UK economy vulnerable to slipping into recession in the event of any further shocks. Such a shock could quite conceivably come from the need to raise interest rates faster and further than there is recent experience of in a bid to control inflation.

This week The Economist argues that the U.S. Federal Reserve left raising interest rates too late because it was determined to wait until unemployment rates had reached optimal post-pandemic lows. The result, the publication argues, is likely to be that the staggered 2.5% rise in the base rate currently pencilled in for the year will prove insufficient to rein in inflation.

Unless average salary levels rise quickly and sufficiently enough to offset the highest levels of inflation since the late 1980s, which looks very unlikely as spiralling overheads squeeze businesses, further rate rises may be necessary. Even if inflation has now peaked, as some of the more optimistic economists believe it probably has, it is almost certain to remain significantly above the 2% target set by the Fed for a long time to come.

Roughly the same can be said of the UK but our economy doesn’t have the same global influence as the world’s largest, which has historically been shown to give the rest a cold when it sneezes. Having recognised that inflation was spiralling out of control late the Fed looks like it will now have to bring in more severe measures to put the breaks on a U.S. economy hopped-up by the huge $1.9 trillion stimulus package introduced last spring to boost the pandemic recovery.

The historical evidence suggests the Fed will struggle to apply the economic breaks without catalysing some level of recession. It has only thrice managed to slow the economy without instigating a downturn in 60 years and never after a period of rapid inflation comparable to that we’ve just had.

Inflation remaining heightened and limp or negative economic growth would meet most definitions of the term stagflation.

What exactly is stagflation?

There is no technical economic definition for stagflation in the same way there is for recession. However, it is generally accepted to refer to a period during which inflation levels are high and economic growth weak or unemployment rates high.

Unemployment rates in developed economies are currently very low and aren’t expected to rise dangerously any time soon. But inflation levels are high, are likely to remain elevated for at least 2-3 years, and economic growth sluggish to the point of vulnerability.

The term stagflation is believed to have been coined in 1965 by the Conservative politician Iain Macleod. Addressing parliament he told MPs that the UK was facing

“the worst of both worlds. Not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of stagflation situation”.

At the time Mr Macleod was speaking, the UK’s inflation rate was 4.66% and growth had dropped from 5.5% the previous year to 2.2%. This year, British and US growth rates are expected to be better than that but inflation also higher than it was back in 1965. And next year it is more than possible that growth on both sides of the Atlantic drops below 2.2% with inflation at around or higher levels at the time of the “sort of stagflation situation” outlined in parliament almost sixty years ago.

There’s a strong argument we’re already in a period of stagflation and it could potentially continue for another couple of years or longer.

Can you invest your way out of stagflation or at least minimise its impact on your finances?

When the economics of our day-to-day lives change, investors can adjust their portfolios to compensate. As the cost of energy commodities like oil and gas have leapt in the last year, so have the valuations of the companies selling oil and gas. The same can be said of agricultural commodities and food prices and the valuations of the companies selling those products.

That means investors can potentially offset paying more for fuel, energy and groceries by earning more from investments in these sectors. But does that still work when, as Mr Macleod said back in 1965, we “face the worst of both worlds” and stagflation?

Hoping to make significant gains without taking on high levels of risk that could go badly wrong during a period of stagflation is unrealistic. But there are ways to adjust an investment portfolio for stagflation that should limit the downside and could even maintain a level of growth.

If you are ten years or longer from needing to draw down investments you could choose to do absolutely nothing. If you are confident your portfolio is well balanced for the long term there is nothing wrong with sitting tight, taking a hit now and remaining confident the years ahead will see your holdings recover and prosper.

But if your timeline is shorter or you would like to make some damage limitation adjustments, what can you do?

Equities investment for stagflation

It probably comes as little surprise that stagflation is not generally positive for equities. A Schroders study shows Wall Street equities have lost an average of 7.1% during periods considered to represent stagflation since 1988. UK equities were down an average of 2.9% over the same periods.

However, growth stocks and companies selling discretionary goods and services are worst affected, explaining why U.S. stocks have been historically poorer performers than London-listed companies during periods of stagflation. Wall Street has far more growth stocks than London, which is heavily weighted towards energy, finance and mining stocks. And exactly those are the sectors that typically do well during periods of higher inflation.

The same stocks that would be invested in to combat inflation, like energy companies, agriculture companies, miners and banks, make sense for stagflation.

Bonds for stagflation

Fixed income investments like bonds usually do well when stock markets are struggling and interest rates rising. But if inflation rates are also heightened as they are now, investing in bonds becomes problematic as even higher interest rates can still run at a significant loss to inflation.

But bonds to offer a level of security and diversification to a portfolio so shouldn’t necessarily be rejected altogether. An option is for investors to be a little more aggressive and go for short term higher interest bonds such as emerging markets debt.

Schroders says U.S. ten-year government bonds have returned an annual average of 6.3% during periods of stagflation while UK equivalents have returned just 0.4%. So there could be an argument for buying U.S. debt rather than investing in British gilts.

Commodities and property

Periods of stagflation have historically been good for “tangible” assets like commodities and property, which are seen as a safe and effective way to preserve capital.  Schroders says commodities have returned 18.1%during times of stagflation since 1988, gold 14.1% and REITs (real estate investment trusts, which mainly invest in commercial property) 9.5%.

So if you do decide you want to make stagflation-proofing adjustments to your investment portfolio, history says it may be wise to dump growth stocks in favour of those of companies selling essentials like energy and food. Go for shorter-term, higher risk but higher reward emerging market bonds or mid-term U.S. treasuries for fixed income security. And consider commodities, gold and property too.

Or if you have time on your hands you could always do nothing and wait for recovery while potentially buying up bargain growth stocks you consider to have been oversold.

The post What exactly is stagflation, have we entered it and can you invest your way out of it? first appeared on Trading and Investment News.

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No sign of major crude oil price decline any time soon

Bullish pressure on crude oil markets doesn’t seem to be easing Crude oil prices fell last week, notching their second weekly decline in the face of…




Bullish pressure on crude oil markets doesn’t seem to be easing

Crude oil prices fell last week, notching their second weekly decline in the face of concern that rising interest rates could push the global economy into recession.

Yet the future of crude oil still seems bullish to many. Spare capacity, or lack of it, is just one of the reasons.

The global surplus of crude production capacity in May was less than half the 2021 average, the U.S. Energy Information Administration (EIA) reported on Friday.

The EIA estimated that as of May, producers in nations not members of the Organization of Petroleum Exporting Countries (OPEC) had about 280,000 barrels per day (bpd) of surplus capacity, down sharply from 1.4 million bpd in 2021. It said 60 per cent of the May 2021 figure was from Russia, which is increasingly under sanctions related to its invasion of Ukraine.

The OPEC+ alliance of oil producers is running out of capacity to pump crude, and that includes its most significant member, Saudi Arabia, Nigerian Minister of State for Petroleum Resources Timipre Sylva told Bloomberg last week.

“Some people believe the prices to be a little bit on the high side and expect us to pump a little bit more, but at this moment there is really little additional capacity,” Sylva said in a briefing with reporters on Friday. “Even Saudi Arabia, Russia, of course, Russia, is out of the market now more or less.” Nigeria was also unable to fulfil its output obligations, added Sylva.

Recent COVID-19-related lockdowns in parts of China – the world’s largest crude importer – also played a significant role in the global oil dynamics. The lack of Chinese oil consumption due to the lockdowns helped keep the markets in a check – somewhat.

Oil prices haven’t peaked yet because Chinese demand has yet to return to normal, a United Arab Emirates official told a conference in Jordan early this month. “If we continue consuming, with the pace of consumption we have, we are nowhere near the peak because China is not back yet,” UAE Energy Minister Suhail Al-Mazrouei said. “China will come with more consumption.”

Al-Mazrouei warned that without more investment across the globe, OPEC and its allies can’t guarantee sufficient supplies of oil as demand fully recovers from the pandemic.

But the check on the Chinese crude consumption seems to be easing.

On Saturday, Beijing, a city of 21 million-plus people, announced that primary and secondary schools would resume in-person classes. And as life seemed to return to normal, the Universal Beijing Resort, which was closed for nearly two months, reopened on Saturday.

Chinese economic hub Shanghai, with a population of 28 million-plus people, also declared victory over COVID after reporting zero new local cases for the first time in two months.

The two major cities were among several places in China that implemented curbs to stop the spread of the omicron wave from March to May.

But the easing of sanctions should mean oil’s price trajectory will resume its upward march.

In the meantime, in the U.S., the Biden administration is eying tougher anti-smog requirements. According to Bloomberg, that could negatively impact drilling across parts of the Permian Basin, which straddles Texas and New Mexico and is the world’s biggest oil field.

While the world is looking for clues about what the loss of supply from Russia will mean, reports are pouring in that the ongoing political turmoil in Libya could plague its oil output throughout the year.

The return of blockades on oilfields and export terminals amid renewed political tension is depriving the market of some of Libya’s oil at a time of tight global supply, said Tsvetana Paraskova in a piece for

And in the ongoing political push to strangle Russian energy output, the G7 was reportedly discussing a price cap on oil imports from Russia. Western countries are increasingly frustrated that their efforts to squeeze out Russian energy supplies from the markets have had the counterproductive effect of driving up the global crude price, which is leading to Russia earning more money for its war chest.

To tackle the issue, and increase pressure on Russia, U.S. Treasury Secretary Janet Yellen is proposing a price cap on Russian crude oil sales. The idea is to lift the sanction on insurance for Russian crude cargo for countries that accept buying Russian oil at an agreed maximum price. Her proposal is aimed at squeezing Russian crude out of the market as much as possible.

So the bullish pressure on crude oil markets doesn’t seem to be easing.

By Rashid Husain Syed

Toronto-based Rashid Husain Syed is a respected energy and political analyst. The Middle East is his area of focus. As well as writing for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has provided his perspective on global energy issues to the Department of Energy in Washington and the International Energy Agency in Paris.

Courtesy of Troy Media

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University of Cincinnati enrolling patients for PTSD clinical trials

About 8% of Americans will experience post-traumatic stress disorder at some point in their lives, but there are still few effective options to treat the…



About 8% of Americans will experience post-traumatic stress disorder at some point in their lives, but there are still few effective options to treat the condition.

Credit: Photo/University of Cincinnati

About 8% of Americans will experience post-traumatic stress disorder at some point in their lives, but there are still few effective options to treat the condition.

“There are some medical treatments for PTSD and psychotherapies for PTSD, but patients continue to suffer with symptoms that aren’t responsive to the currently available treatments,” said Lesley Arnold, MD.

June is PTSD Awareness Month, and the University of Cincinnati is currently enrolling patients for clinical trials examining the effectiveness of different medications to better treat PTSD symptoms.

The basics

Arnold said PTSD is a common and often chronic disorder that develops after a traumatic event that is either personally experienced or witnessed by a person.

“People with PTSD often re-experience aspects of the original trauma and can develop symptoms such as avoidance of trauma reminders, negative thoughts and feelings and increased alertness to their surroundings,” said Arnold, director of the Women’s Health Research Program and professor in the Department of Psychiatry and Behavioral Neuroscience in the UC College of Medicine.

Most people who are exposed to a trauma will have an acute stress response in the moment, Arnold said, but about 30% of those who experience a trauma develop PTSD. Symptoms can last for months or years and also include disrupted sleep or nightmares, issues with memory or focus and depression and anxiety. 

In people who are at higher risk for exposure to trauma, such as war veterans, PTSD occurs in even higher proportions, Arnold said. The COVID-19 pandemic has also exacerbated symptoms of PTSD for some individuals.

“It led to some isolation and made it difficult for individuals to seek treatment or to continue to engage in treatment,” Arnold said. 

New trials

Arnold and her team are focused on testing medication-based treatments that could help alleviate the symptoms of PTSD that have not responded to currently available medications, including sleeplessness and nightmares among others.

“The problem that we have is that there are two FDA medications approved for the treatment of PTSD, but these medications aren’t effective for everybody, and they take a long time to work,” Arnold said. 

Each of the clinical trials will test different novel drugs that take new approaches to treat unregulated neurotransmitters in the brain that are involved in PTSD. The randomized trials will measure the effectiveness of the medications compared to a placebo control group.

“We are in urgent need of treatments for PTSD,” Arnold said. “That’s why these trials are so important because they offer a novel approach that we hope to be effective in helping patients overcome the problems associated with PTSD and return to full function.”

Adults, both women and men, over the age of 18 with PTSD are eligible to participate in the trials, with patients with a variety of different trauma experiences being recruited. The trials will involve about three months of participation from patients.

“We’re asking for volunteers to help us with our trials, those individuals who continue to have symptoms of PTSD,” Arnold said. “We are conducting these trials actively, and I would encourage individuals to come forward to help.”

Arnold said there has been an increased interest in finding drug treatments for PTSD in about the last five years.

“This is an exciting time and a hopeful time for people with PTSD because we are actively seeking out better treatments,” she said. “There’s been a growing interest and a recognition of the unmet need in this population, so I’m really gratified to be able to have these trials going on now and to be able to offer some hope to individuals with PTSD.”

For more information on the PTSD trials at UC, call 513-558-6612.

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Why REV Stock is Trending After Filing Chapter 11 Bankruptcy

Will Revlon end up getting bought out after filing for bankruptcy? And if so, how will it affect investors holding REV stock?
The post Why REV Stock is…



Revlon (NYSE: REV), the iconic beauty brand, has filed for chapter 11 bankruptcy. Meanwhile, REV stock rallied on the news as traders promoted the idea of a buyout on social media.

After implementing a new strategy to drive growth, Revlon did see business pick up last year. But it wasn’t enough to overcome the massive debt Revlon piled on throughout the years. Nonetheless, the company has been losing money since 2015.

The bankruptcy filing will help the company “reorganize its capital structure” and “improve its long-term outlook.”

Will it be enough to turn the company around? Revlon still faces intense competition and rising costs. Not to mention an uphill battle with its supply chain.

Yet the company has a strong portfolio of brands. On top of this, Revlon already has a buyout offer, according to reports. Will Revlon end up getting bought out? And if so, how will it affect investors holding REV stock?

Keep reading to learn why Revlon stock is trending and what you can expect next.

Why Is REV Stock Trending

The news of Revlon’s bankruptcy broke about two weeks ago. As a result, retail traders piled into REV stock, promoting it as a short squeeze candidate.

The announcement caused REV shares to first crater. And then, after hitting an all-time low of $1.08, Revlon shares rallied on heavy volume. Revlon stock soared over 800% within a week, gaining meme stock status.

Traders on social media sites such as Reddit and StockTwits compared the situation to rental car company Hertz (NASDAQ: HTZ).

After the initial fallout, Hertz stock soared after announcing bankruptcy in 2020. As a result, HTZ stock gained over 900% as retail traders bid the price up.

Doesn’t bankruptcy mean the company is going out of business? Why would someone want to own a bankrupt company?

For one thing, Chapter 11 bankruptcy doesn’t mean the company is going out of business. To illustrate, in Hertz’s case, the company sold over 200,000 vehicles. Not only that, but investors bet on the company’s turnaround.

An investment group gave Hertz $5.9B while the company managed debt. As a result, Hertz is back in business, with demand for rentals heating up.

At the same time, it may be a different situation with Revlon than Hertz.

How Did This Happen

Revlon has been losing market share for years. Newcomers enter the industry with attractive marketing campaigns, drawing in the younger crowd.

For example, a longtime rival, Coty Inc (NYSE: COTY), teamed up with Kim Kardashian and Kylie Jenner. Coty has a 20% stake in Kim’s beauty business and an over 50% in Kylie’s. With this in mind, the deals are part of Coty’s transition to an online, DTC business model.

Meanwhile, Revlon has failed to keep up in the digital age. That said, the company was started 90 years ago and has built strong ties with leading retailers.

But, as shoppers move online, especially younger crowds, Revlon has been slower to catch trends. Coty’s partnerships expand their reach online, particularly on social media. Celebrity influencers push products to their millions of followers.

Then, the pandemic hit. Revlon saw sales crater as a result. For one thing, with lockdowns in place, people wore less makeup. And on top of this, if they did buy makeup, it was online.

So, Revlon lost even more market share. And then higher raw material costs, shortages, and rising labor put the company over the edge. Below is a look at Revlon’s debt by year since 2012.

Revlon started missing payments as a result, and vendors had enough. The past due accounts piled up, and the company couldn’t keep up. So, Revlon filed for voluntary chapter 11 bankruptcy on June 16, 2022.

What’s Next for Revlon

As shown, chapter 11 doesn’t mean Revlon is going out of business. In fact, it will give the company a chance to restructure its debt, like Hertz. Here’s what we know so far.

  • Revlon expects to receive $575M in financing to support day-to-day operations.
  • The pre-trial hearings are ongoing, with another one today.
  • Revlon will have the chance to work with creditors to write off some debt.
  • Another option is the company gets bought out.

We could also see a potential sale of Revlon’s assets. Revlon’s CEO says demand remains solid, and “people love our brands” while adding the company’s strong market position.

But she added that the company’s debt situation has made it challenging to do business. In particular, rising costs and shortages.

Revlon will continue doing business for now while working with those they owe money to. If they come to a resolution, the company may reduce its debt to better position itself in the long term.

At the same time, investors holding REV stock may not get anything.

Is It Worth Buying REV Stock

The first thing to know about buying REV stock right now is that you can lose everything. If Revlon fails to turn a profit, it will continue losing money.

The bankruptcy filing will give the company a second chance to restructure its debt. But Revlon will still be operating with the challenging conditions from before.

Though raw material costs have dropped slightly in the past month, they are still well above pre-pandemic levels. Revlon will need to make significant changes behind the scenes to overcome the difficulties.

Can REV stock become the next GameStop (NYSE: GME) or Hertz? That’s what traders on social media are hoping for. But, with competition gaining market share, the situation seems different.

At the same time, Revlon is a massive brand in makeup. For instance, Revlon is the #3 global cosmetics brand. Not only that, but they are also the #1 for mass fragrance and nail brand for professionals.

Yet these facts don’t mean Revlon stock is worth buying. The company still faces rising costs. Furthermore, Revlon has a long list of creditors they will pay before investors. For this reason, it may be best to stay on the sidelines for this one.

The post Why REV Stock is Trending After Filing Chapter 11 Bankruptcy appeared first on Investment U.

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