A ‘resounding no’ to stagflation amid strong job market: PNC Asset Management CIO

Investor concerns about the health of the broader economy were tentatively quelled by last week’s strong jobs report for the month of March. However, questions remain about the true strength of the economy amid slowing growth and resulting fears of stagflation.

According to PNC Asset Management Group (PNC) Chief Investment Officer Amanda Agati, the answer to the question of looming stagflation is a “resounding no.”

“You just have to admit that the job market here is very strong and very healthy,” Agati told Yahoo Finance Live. “Yes, there is still room for recovery from here, but certainly very tight. And so, in an environment of stagflation, we typically see a much weaker labor market and employment environment than what we’re seeing today.”

And while Agati doesn’t think the circumstances look dire enough to start sounding the stagflation alarm, he acknowledges that markets are entering a state of slowing growth.

“So, yes, we are in an expansion phase of the cycle that is slowing down. We have to be honest about it,” she added. “The exchange rate is certainly slowing, but with such a strong jobs report and a tight labor market, I don’t think we can say it’s stagflation anytime soon here, and certainly not as of today.”

Agati joined Yahoo Finance Live to discuss stagflation and the job market in light of March’s strong jobs report. PNC Asset Management Group, a member of The PNC Financial Services Group, Inc., is a relationship-based provider of investment, planning, banking and fiduciary services to high net worth individuals and institutions.

The March jobs report saw nonfarm payrolls rise 431,000 vs. 490,000 expected and an upward revision of 750,000 in February. The unemployment rate, however, was lower than expected at 3.6%, down 0.2% from February’s 3.8%, versus 3.7% forecast, marking the 15th straight month of expansion. of the US workforce

Rising fears of stagflation

Investors are increasingly concerned about the consequences of sustained inflation and the Federal Reserve’s actions to combat it. Investment legend Bill Gross, best known for co-founding PIMCO, recently warned of the possibility of stagflation in the coming years. The FOMC will meet again on May 3-4, when the next round of rate hikes is expected to further curb price increases.

“It’s hard to argue that someone is getting away unscathed. I mean, we’re definitely seeing broad-based price increases across the board,” Agati said. “And this is definitely a sustained inflation environment. At the beginning of the year, we expected that we would start to see more supply chain normalization to help remove some of the inflationary fire from the backdrop. Obviously, that’s not materializing at all.”

Agati believes that the first quarter earnings season will be especially revealing in how companies and the broader market are handling elevated prices.

“We’re sitting at profitability levels that are basically cycle highs, if not record highs,” he added. “So the key will be, have companies been able to get through or continue to get through the price increases and maintain this profitable environment? Or are we going to start seeing that flat tire take effect in earnings season?

Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter @thomashumTV

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