Turn on the news on any given day and there’s something new to worry about oil prices, inflation, the rupee, geopolitics. The real question isn’t whether to worry. It’s what to do about it.
Stagflation a word most of us hoped we’d never hear again
Not too long ago, things looked relatively calm. Inflation was easing, growth was holding up, and the big central banks were expected to start cutting interest rates through 2025 and into 2026. That story has changed rather quickly.
In the US, Europe, and the UK, growth forecasts for 2026 have been quietly revised downward while inflation forecasts have crept back up. That’s the classic stagflation setup: slower growth, sticky inflation, and central banks caught in the middle with very little room to move. They can’t cut rates aggressively without risking more inflation, and they can’t raise rates too hard without hurting growth further. It’s an uncomfortable place to be.
Energy is doing a lot of the damage here. Ongoing tensions in the Middle East particularly between the US and Iran have kept oil prices elevated. And energy inflation is nasty because it doesn’t stay in one place. It feeds into transport costs, manufacturing, utilities, food eventually, almost everything you buy.
India isn’t the same story as the rest of the world
When global headlines turn gloomy, it’s tempting to assume the worst for Indian markets too. But it’s worth separating the noise from the reality.
India’s growth expectation, even after recent revisions, still sits around 7.5%(As per Bloomberg’s expectation). That makes us one of the fastest-growing major economies on the planet right now not in spite of the global environment, but somewhat independent of it. Our economy runs mostly on domestic demand, which means we’re less exposed to the kind of export slowdowns hitting places like China or Germany.
Banks are in far better shape than they were a few years ago. Infrastructure spending is real and ongoing. Corporate balance sheets are healthier. And household financial savings are finally moving toward proper financial instruments in a meaningful way. These aren’t just talking points they’re the structural foundations that cushion India when global conditions get rough.
The rate cut everyone was waiting for? It’s been pushed back
For a while, markets were confident the US Federal Reserve would begin cutting rates meaningfully in 2026. With inflation concerns resurfacing, that confidence has faded. The Fed is likely to stay cautious, and rates could stay higher for longer than most people expected.
Why does this matter if you’re sitting in India? Because US interest rates are one of the biggest drivers of global capital flows. When American rates stay high, money tends to stay in dollar assets and that creates pressure on currencies and equity markets elsewhere, including here.
That said, higher rates aren’t purely bad news for investors. Fixed income becomes more attractive. Certain sectors do better in a high-rate environment. The picture gets more complex, not necessarily more negative but it does mean you can’t rely on just one type of investment to do all the work.
Gold isn’t acting like gold used to. Neither are bonds.
Most of us grew up with a simple mental model: when things go wrong in the world, gold goes up and bond yields come down. That model is getting a little wobbly.
During COVID and the Russia-Ukraine conflict, gold did exactly what it was supposed to it climbed. But during the more recent rounds of Middle East tension, it actually pulled back from its highs. It hasn’t fallen apart, but it hasn’t been the reliable shield people expected either.
Must Read: The Multi-Asset Advantage
Bonds tell a similar story. Normally, fear sends investors into government bonds, pushing yields down. But right now, inflation anxiety is stronger than the safe-haven instinct so yields are staying elevated even as uncertainty rises. India has seen this play out locally too.
The takeaway isn’t that these assets are broken. It’s just that no single asset class is going to protect you from everything, all the time. Markets are being moved by too many things at once growth fears, inflation, oil prices, central bank signals, geopolitics – for any one hedge to cover all the bases.
The market has seen worse. A lot worse.
Here’s a thought worth sitting with: if you had invested in Indian equities and stayed invested through the Harshad Mehta scam, the Asian financial crisis, the dot-com crash, the 2008 meltdown, demonetization, COVID, and the recent trade war chaos – you’d be sitting on substantial wealth today.
At every single one of those moments, it felt like the right time to sit out. And at every single one of those moments, that instinct would have cost you.
Volatility is not the enemy. Panic-driven decisions are. The question to ask when markets get rough isn’t “should I stop investing?” it’s “has anything changed about where I want to be in 10 years?” Almost always, the answer is no. What might need adjusting is the mix which assets you hold and in what proportion not the commitment to staying invested.
The investors who come out ahead in environments like this usually aren’t the ones who saw it all coming. They’re the ones who had a flexible, well-structured portfolio and the discipline to let it do its job.
Want to know how Sphere PMS approaches markets like these? Explore Sphere PMS built for exactly this kind of environment.
