The threat of high inflation, climbing rates and sputtering growth could turn into a “potentially poisonous mix” for stocks, prompting a new underweight call for equities by Erik Knutzen, chief investment officer of Neuberger Berman’s multiasset class portfolios.
“Higher inflation generally demands higher interest rates and tighter policy from central banks,” Knutzen wrote in a Sunday client note. Furthermore, while the outbreak of war historically tends to lead to temporary pressure on stocks, Neuberger Berman’s chief investment office has been arguing for a while that this conflict may prove different, largely because of Russia and Ukraine’s considerable sway over global oil BRN00, -1.74% CL.1, -1.43%, energy and grain markets.
What’s more, a string of Federal Reserve officials have been talking about potentially front-loading rate hikes this year to more quickly tamp down inflation. Cleveland Fed President Loretta Mester last week said the fed-funds rate should be raised to about 2.5% this year.