30.03.2026 - S like Stagflation
European data released today is increasingly pointing toward a stagflationary backdrop.
The European Economic Sentiment Indicator dropped sharply, accompanied by a notable decline in consumer confidence. At the same time, consumer inflation expectations moved higher, highlighting growing concerns about persistent price pressures.
Germany added to this picture: inflation accelerated in March from 1.9% to 2.7%, reinforcing the view that price dynamics are turning upward again, despite weakening growth signals.
In the afternoon, Fed chairman Jerome Powell highlighted that the ongoing oil price shock is adding further pressure to inflation. He confirms what markets have started to realize: the spillover effects from the Middle East conflict, feeding directly into the macro environment.
Markets: investors try to buy the dip despite continuing rise in the oil prices
Equities: moved higher in Asia in Europe, started positive in the US
Bonds: yields lower - US 10-year Treasury yield at 4.35%
Commodities: oil prices continue to rise - WTI crude oil USD102/barrel and Brent towards USD 112/barrel. Precious metals gain - silver at USD 70/oz and gold above USD 4’520/oz
Currencies: USD gains
Cryptos: slightly up - Bitcoin USD 67k
Volatility: The VIX declines, however remains above 30.
My View: War headlines will remain the key market driver in the short term. However, it is critical not to lose sight of the underlying macro shift. The Middle East conflict has already triggered an oil price shock. This shock is far from over.
With high probability, we are going to see the classic setup of stagflation: slowing growth combined with rising inflation.
This puts central banks in a difficult position. If they want to maintain credibility around their 2% inflation targets, they will be forced to stay restrictive. The ECB is increasingly likely to move toward further tightening, while the Fed may remain on hold for longer, pushing back against the market’s expectation of rate cuts.
A repricing of the interest rate path inevitably leads to a repricing of equity valuations. The bond market has already adjusted significantly. Equities, however, still appear to be in a phase of denial, supported by residual liquidity and a “buy-the-dip” mentality that has worked for years.
This divergence is unlikely to persist. A cautious stance remains key. Downside risks are elevated, while the potential for meaningful short-term upside appears limited. For long-term opportunities to emerge, markets need to reprice first. A phase of panic selling would provide the most attractive entry points to gradually redeploy cash.
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