1970s-style stagflation could hit global economy: deVere CEO
Households, businesses and investors should prepare for 1970’s-style global stagflation, warns the CEO of one of the world’s largest independent financial advisory organisations.
Nigel Green of deVere Group is speaking out after private sector output in the euro zone sank to a 10-month low in March, amid mounting evidence of the impact the Iran conflict is having on the global economy.
He says: “The figures show the severe impact the Iran war is already having on the euro zone economy.
“But, like in the 1970s, stagflation could become a widespread global phenomenon characterised by high inflation, low growth, and high unemployment, heavily driven by oil price shocks.
“Back then it hit most developed economies, including the US, Canada, Western Europe, and Japan, largely ending the post-war economic expansion, and it looks like a spectre that may be looming once again.”
Recent flash PMI data underscores the shift. Euro zone business activity has slowed sharply, with the headline index hovering just above the contraction threshold at 50.5, down from 51.9 the previous month.
Cost pressures are accelerating at the fastest pace in more than three years as energy prices surge and supply chains tighten.
“Oil and gas prices are feeding directly into production costs, transport, and ultimately consumer prices. At the same time, demand is weakening.
“This combination is toxic. Growth is fading just as inflation is being reignited. Central banks have very limited room to respond effectively,” explains the deVere CEO.
Energy markets have tightened rapidly since the escalation of tensions involving Iran, with crude prices pushing higher and shipping disruptions adding further strain.
“Europe and Asia remain particularly exposed due to its reliance on imported energy, leaving businesses vulnerable to sustained price volatility.”
He continues: “Investors need to recognise that traditional assumptions are breaking down. Bonds may not offer the same protection if inflation remains elevated. Equities face margin pressure as input costs rise and consumers pull back.
“Cash loses value in real terms in an inflationary environment. Standing still is not a strategy.”
The European Central Bank has already signalled weaker growth expectations for 2026, projecting sub-1% expansion, while inflation forecasts risk drifting higher if energy prices remain elevated.
Surveys indicate declining business confidence and softer hiring intentions, reinforcing concerns that the slowdown is gaining traction.
“Preparation is essential. Portfolios must be structured for resilience, not optimism. Investors should be increasing exposure to assets that historically perform in inflationary periods, including commodities, energy producers, and selective real assets.
“In terms of equities, the focus must shift to sectors with pricing power and strong balance sheets. Companies able to pass on higher costs without destroying demand will outperform.”
Currency markets are also likely to reflect the divergence in economic performance and policy responses.
Risk-sensitive currencies could come under pressure, while volatility across foreign exchange markets is expected to increase.
Nigel Green comments: “Diversification across currencies, geographies, asset classes and sectors becomes more important in this environment. Overconcentration in any single one increases vulnerability.”
Geopolitical risk now sits at the centre of the economic outlook. Prolonged conflict in the Middle East would sustain pressure on energy markets, while any escalation could trigger further supply disruptions.
Duration matters. A short-lived shock is manageable. A prolonged period of elevated energy prices changes the entire economic trajectory.
Policy makers are already facing difficult trade-offs. Raising rates to control inflation risks deepening the slowdown. Cutting rates to support growth risks fuelling further inflation. “Clearly, neither path is straightforward,” notes the CEO.
Nigel Green concludes: “Complacency is the biggest risk. Stagflation is not a theoretical scenario; the early signals are already visible in the data.
“Investors who act decisively, diversify intelligently, and prioritise real returns over nominal gains will be best positioned to protect and grow wealth in the period ahead.”