Stocks: Stagflation Concerns Weigh on US Equities — Deutsche Bank

Global stocks fell to one-month lows, led by the S&P 500 and Nasdaq, as concerns over stagflation resurfaced amid rising oil prices and US-Iran tensions. In its latest report, Deutsche Bank strategists noted that funds are flowing out of growth stocks, with a marked decline in risk appetite.

**Stagflation Concerns Curb Risk Appetite**

Persistently higher oil prices have intensified worries over the coexistence of sticky inflation and slowing economic growth. Deutsche Bank believes this stagflationary mix directly pressures equity valuations, particularly rate-sensitive growth sectors. The S&P 500 and Nasdaq, indices with heavy growth-stock weightings, are the main drags in this downturn.

**Fund Flows Shift**

The report shows funds rotating from growth stocks into more defensive areas. US-Iran tensions have further amplified risk-off sentiment, spreading adjustment pressure in global equities beyond US markets. Deutsche Bank strategists stated that, until oil prices show a clear pullback and geopolitical risks ease, equities face continued volatility in the near term.

**Expectations of Policy Divergence Rise**

Separately, Bloomberg reported that Deutsche Bank has recently joined the chorus bullish on Chinese equities, betting that policy divergence between the Federal Reserve and the People's Bank of China will drive further US market pullbacks while boosting Chinese markets. The bank believes uncertainty over US inflation and growth prospects could continue to erode the relative appeal of US stocks.