Despite the positive sentiment in the stock market that has seen a rebound in both year-to-date (YtD) and month-to-date (MtD) returns, investment experts have said that uptick in inflationary pressure and weakness in the macroeconomic environment may constitute a threat to the continued recovery of the stock market.
They project that the year-end may not be rosy due to the impending stagflation, a situation where growth is regarding amidst rising inflation.
Headline inflation rose to 13.71 percent, according to September inflation report by the National Bureau of Statistics, NBS, and is projected to rise further through December.In the meantime, performance of the stock market last week show a sustained uptrend on the back of negative real returns in fixed income and significant buy pressure in some highly capitalised stocks.
“The rally may not be sustainable due to expectation of ravaging inflation.
More so, the fundamentals of the economy does not support rally. Year end may not be rosy because of reaction to impending stagflation.”
In their own projections, analysts at Cordros Capital, a Lagos-based investment banking firm, said: “We expect the market might continue to benefit as domestic investors seek alpha-yielding opportunities in the face of increasingly negative real returns in the fixed income market.