Stagflation fears overblown: PIMCO CEO
NEW YORK Reuters - Worries that the U.S. economy is heading toward stagflation are overblown, several high-profile bond investors said at the 2021 Milken Global Conference program on Tuesday.
Stagflation - when high economic activity is combined with stagnant inflation is extremely unlikely, says PIMCO Chief Executive Emmanuel Roman in a panel discussion at the conference, held in Beverly Hills, California.
Other participants in the panel discussion - including PGIM CEO Scott Minerd; Invesco CEO Martin Flanagan; Elizabeth Burton, chief investment officer for the Employees Retirement System of Hawaii; and Invesco CEO David Hunt - agreed that the threat of stagflation was remote.
In recent months, with energy prices averaging even as the economy remains constrained by supply chain gridlock, an increasing number of investors have started to fret about the specter of stagflation.
In the past, a stagflationary environment has tended to weigh on stock performance, analysts at Goldman Sachs said in a report published earlier this month.
The S&P 500's median real total return fell to 2.1% per quarter over interdepartmental periods in the past 60 years, compared with an overall median real total return of 2.5% per quarter over that time period.
However, Invesco Flanagan and the panel's other speakers believe that comparatively strong U.S. growth makes the prospect of stagflation unlikely.
Guggenheim's Minerd, who views the recent rise in inflation as temporary, said the current interest rate environment supports stock valuations at current levels.
The S&P 500 Index is trading at a forward price- earnings ratio of about 20, close to the two-decade high of 23 touched in September.
Yes for sure, Minerd said. There are a lot of opportunities for investors in our bubble, but there are a lot of opportunities here. With Treasuries yielding very little, investors' reach for better returns is funding equity markets, PGIM's Hunt said.
It's never been more prudent to hold cash, he said.