Below are some of the most interesting things I came across this week. Click here to subscribe to our free weekly newsletter and get this post delivered to your inbox each Saturday morning.
LINK
As first noted here, the return of 1970’s-style stagflation is a narrative that is starting to take hold in markets. “Coming on top of the ongoing Ukraine and tariff wars, the Iran war is shaping up as the biggest stagflationary shock the world has seen in five decades,” Ken Rogoff tells The Financial Times.
CHART
Carl Quintanilla notes, “Lost count of all the times people scoffed at a 1970s-style inflation ‘double top.’ Not as much laughter now.”
LINK
And it’s not just the war in Iran to blame. As Barron’s reports, “the effects of deglobalization, immigration restrictions, and the upward pressure on energy prices from the buildout of artificial-intelligence-focused datacenters all could lead to higher prices. Higher tariffs are already boosting goods prices as more companies pass on cost hikes this year.”
CHART
A renewed rise in inflation would likely be bad news for the stock market. “When presidents start bragging about the stock market… pay attention. Record-long speech. Record confidence. Record focus on stocks. The latest State of the Union checked every box,” reports Elliott Wave International.
LINK
Finally, as GMO points out, higher corporate investment is associated with lower stock returns. What’s more, periods of higher investment also seem to occur just before economic recessions. “Clearly, this is extremely topical for today,” the firm notes. Could the bursting of the AI bubble soon put the “stag” in “stagflation”?
For a deeper analysis of these themes and what they mean for your investments subscribe to The Felder Report PREMIUM and get instant access to our Market Comments, Monthly Chartbooks, Tactical ETF Portfolio and more.
