Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
“Fifty years ago, the U.S. economy was plagued with stagflation—a stubborn combination of low growth, high unemployment, and elevated inflation. It was a true shock driven by oil embargoes in the Middle East: Gas prices tripled, inflation hit 14%, and unemployment soared toward 9%.”
“While the prospect of galloping, 1970s-style inflation remains low, today’s rising prices are troubling to the younger generations of Americans who were reared on the low inflation and interest rates of the ‘90s and 2000s. When combined with a predicted slowing of the economy and a softening labor market, today’s economy has the makings of what I call 'stagflation lite.'”
Yes. The term Stagflation gets tossed around indiscriminately today. While 3-6% inflation (depending who you listen to or believe) is nothing to sneeze at, it is nothing like the double-digit inflation of the late 70s. And there was slow growth in addition. In the 3 years from ‘78 thru ‘80 annual inflation was running between 9 and 13.3%. And in the 4th year (‘81) it was still elevated at 8.9%. Volker did a “job” and inflation was curbed at the expense of a severe recession.
I hope we never have to experience the Stagflation of the 70s again! Since I was a teenager then, I didn't pay too much attention to the economy. Although I didn't own a vehicle, I do recall the gas rationing of the early 70s.
Our economic situation appears to be much different than that of the 70s. Many people/institutions warning about future Stagflation¹ imply inflation may be 3%-5% with slow growth (but not no growth). Frankly, no one really knows exactly what will transpire. It may be prudent to keep expectations in check although recent market activity seems to contradict this thought!
¹ Perhaps someone could coin a better term for this prognosis?
At Observant and Hank. The discussion about the era of stagflation reminds me just how personal history and economics can be. During that time my wife and I had a couple rentals that were increasing in value and had positive cash flows. we had no kids, no stocks or bonds and no responsibilities. Given the high interest paid on cash we were able to live on our boat in the sea of Cortez on the cheap and our net worth was increasing. Our only worries were the weather and the mechanical state of our boat. No marinas, no hotels, no cars. In retrospect those were the best of times for us and Inflation and high interest rates made it possible that we returned in better shape than when we left. Life became much different for us when we returned to life and land.
I was just starting out in a career in secondary education. My second year into it (1970) I landed a great job in a rapidly growing Detroit suburban system. Being on the second salary tier (based on experience) I earned whopping $7,200 for a year’s work, which seemed like an enormous sum of money then. The most memorable aspect of inflation was walking into grocery stores on the way home from work during the 70s and seeing one or two workers in every aisle marking up the individual prices on products - from jars of pickles to bars or soap. Everything was jumping in price from week to week. It was a full-time job, and back before bar code scanners were in use. The checkout clerk needed to punch in the actual product price after looking at an item. How “lame” that seems today!
What many today overlook, I think, is the compounding effect of inflation. So after 5 years of 7.5% annual inflation things aren’t 7.5% higher. They’re closer to 40% higher than they were at the start of the period.
At Hank. In 1970 I was a substitute teacher in the (not) suburban Detroit schools. $ 37.50 per diem. Food seemed expensive but gas was cheap.
Yep. That’s about what I remember. Hardly worth the pain ISTM.
Don’t remember gas prices very well. But as a kid working at a filling station in the 60s for $1.50 per hour I recall prices in the 30-35 cent range - and that included whatever taxes were imposed.
Perhaps little known - - Regan / Volker are often given credit for slaying the inflation dragon. But it was actually Regan’s (defeated) predecessor Jimmy Carter who appointed Volker as Fed Chair.
hank: What many today overlook, I think, is the compounding effect of inflation. So after 5 years of 7.5% annual inflation things aren’t 7.5% higher. They’re closer to 40% higher than they were at the start of the period.
FD: I can't find 40% in the last 5 years, but I see 25-26%. From 01/2020 to 01/2024 = Biden 4 years. I see about a 23% CPI increase. The fastest 4 years since 1990.
Since 01/2025, we have seen hundreds of predictions, mainly by (dem) economists, about inflation, stagflation, recession, depression, and other horrific stuff within 6-12 months. This means 01/2026.
Can you take these seriously? I don't. Don't worry, I will be around in 01/2026 to report about it.
FD a Troll? Yes. in this instance he is. There was nothing political in my hypothetical 7.5% annual inflation example. I chose the number randomly to illustrate the math involved. I don’t think inflation is limited to any political party. To ascribe such is a gross misrepresentation.
Going from (1970s) memory … Inflation began ticking higher under Johnson (a Democrat), worsened significantly under Nixon (a Republican), worsened further under Ford (a Republican), peaked under Carter (a Democrat) and began subsiding under Regan (a Republican) - although it was Carter (a Democrat) who appointed Paul Volker to be Fed Chair. It had gotten so bad under Ford that he and wife Betty developed and actively promoted the slogan: WIN.
I’m not even opposed to inflation in moderation. A small amount may be beneficial to economies. When the assets I own through stocks, etfs, CEFs, OEFs, collectibles or real estate inflate in dollar value I am happy.
A tighter labor market, tariffs on $3.4 trillion of imports, tax cut stimulus, and a high level of government spending are all happening. This is not even questionable.
The question is not whether or not these are all inflationary pressures. They are classic inflationary pressures. The question is how much inflation they produce. The FEDs hands will be tied. In a tight labor market unemployment will not necessarily rise severely, but wages will go up as businesses compete for scarce resources. The FED may actually have to raise rates, unless they kowtow to political pressure and let inflation run which would be disastrous.
The FED may be unable to ride to the rescue, with unemployment only incrementally higher & inflation rising, if GDP slows as it is projected to do by nearly every source.
From the linked article: "The economy is likely to enter a period of slow growth in the 1% to 2% range. Inflation will hover between 3% to 4%, and unemployment will rise to 4.5% to 5%. While these economic conditions don’t match the double-digit interest rates and inflation and chronically high unemployment of the 70s, the stagflation-lite economic framework will still shock consumers.
Yes, the economy is likely to experience a sugar high following the coming tax cuts, which will temporarily send growth to 3% or higher. But the combination of new tariffs, tighter immigration policies, and sustained annual budget deficits will soon act as a drain on private sector investment as firms and households are priced out of the market."
This implies that there may still money to be made in the 3Q of 2025. But that the whole shebang will coalesce into bad juju at some point not too far off. If inflation hits, GDP falls and the FED raises rates, I would assume that both stocks and bonds take a hit. Cash and cash equivalents may still be a good bet.
Some relevant comments from Roubini in this article:
We might look back at 2022 and try to apply certain aspects to now. Jeremy Siegel had a lot to say about inflation back then. His inflation thoughts were largely correct, in retrospect. Where Siegel was correct was that the FED had underestimated inflation due to their backwards looking indicators. Being "data-driven" has its challenges. Where Siegel was wrong was that aggressive tightening would possibly cause recession at that time, though it did cause a market correction. Where Siegel was also correct, was that strong GDP growth could offset inflation over the medium term. We had strong GDP growth throughout. No recession and inflation was contained rather quickly.
Now let's apply all of that to our current circumstances. If we get inflationary pressure, and GDP is severely dampened by tariffs and trade barriers (new variables) raising rates could make things worse. Plus, rates are already higher and likely having a negative impact on housing affordability. No doubt this is why the FED is reluctant to cut rates. We are in a potentially similar situation, with a couple new variables to watch carefully.
A tighter labor market, tariffs on $3.4 trillion of imports, tax cut stimulus, and a high level of government spending are all happening. This is not even questionable.
The question is not whether or not these are all inflationary pressures. They are classic inflationary pressures. The question is how much inflation they produce. The FEDs hands will be tied. In a tight labor market unemployment will not necessarily rise severely, but wages will go up as businesses compete for scarce resources. The FED may actually have to raise rates, unless they kowtow to political pressure and let inflation run which would be disastrous.
The FED may be unable to ride to the rescue, with unemployment only incrementally higher & inflation rising, if GDP slows as it is projected to do by nearly every source.
From the linked article: "The economy is likely to enter a period of slow growth in the 1% to 2% range. Inflation will hover between 3% to 4%, and unemployment will rise to 4.5% to 5%. While these economic conditions don’t match the double-digit interest rates and inflation and chronically high unemployment of the 70s, the stagflation-lite economic framework will still shock consumers.
Yes, the economy is likely to experience a sugar high following the coming tax cuts, which will temporarily send growth to 3% or higher. But the combination of new tariffs, tighter immigration policies, and sustained annual budget deficits will soon act as a drain on private sector investment as firms and households are priced out of the market."
This implies that there may still money to be made in the 3Q of 2025. But that the whole shebang will coalesce into bad juju at some point not too far off. If inflation hits, GDP falls and the FED raises rates, I would assume that both stocks and bonds take a hit. Cash and cash equivalents may still be a good bet.
Some relevant comments from Roubini in this article:
Roubini has been one of the worst economic predictors, costing investors a lot of performance. See quote below from wiki (link).
This is why he is among the "best" market predictors (here).
Lastly, in 1-2 years from now we will revisit this thread.
However, financial journalist Justin Fox observed in the Harvard Business Review in 2010 that "In fact, Roubini didn't exactly predict the crisis that began in mid-2007... Roubini spent several years predicting a very different sort of crisis — one in which foreign central banks diversifying their holdings out of Treasuries sparked a run on the dollar — only to turn in late 2006 to warning of a U.S. housing bust and a global 'hard landing'. He still didn't give a perfectly clear or (in retrospect) accurate vision of how exactly this would play out... I'm more than a little weirded out by the status of prophet that he has been accorded since."[27][28][29] Others noted that: "The problem is that even though he was spectacularly right on this one, he went on to predict time and time again, as the markets and the economy recovered in the years following the collapse, that there would be a follow-up crisis and that more extreme crashes were inevitable. His calls, after his initial pronouncement, were consistently wrong. Indeed, if you had listened to him, and many investors did, you would have missed the longest bull market run in US market history."[30][31][32][33] Another observed: "For a prophet, he's wrong an awful lot of the time."[34] Tony Robbins wrote: "Roubini warned of a recession in 2004 (wrongly), 2005 (wrongly), 2006 (wrongly), and 2007 (wrongly)" ... and he "predicted (wrongly) that there'd be a 'significant' stock market correction in 2013."[35] Speaking about Roubini, economist Anirvan Banerji told The New York Times: "Even a stopped clock is right twice a day," and said: "The average time between recessions is about five years ... So, if you forecast a recession one year and it doesn't happen, and you repeat your forecast year after year ... at some point the recession will arrive."[36][10] Economist Nariman Behravesh said: "Nouriel Roubini has been singing the doom-and-gloom story for 10 years. Eventually something was going to be right."[17]
In January 2009, Roubini predicted that oil prices would stay below $40 for all of 2009. By the end of 2009, however, oil prices were at $80.[34][37] In March 2009, he predicted the S&P 500 would fall below 600 that year, and possibly plummet to 200.[38] It closed at over 1,115 however, up 24%, the largest single-year gain since 2003. CNBC's Jim Cramer wrote that Roubini was "intoxicated" with his own "prescience and vision," and should realize that things are better than he predicted; Roubini called Cramer a "buffoon," and told him to "just shut up".[34][39] Although in April 2009, Roubini prophesied that the United States economy would decline in the final two quarters of 2009, and that the US economy would increase just 0.5% to 1% in 2010, in fact the U.S. economy in each of those six quarters increased at a 2.5% average annual rate.[40] Then in June 2009 he predicted that what he called a "perfect storm" was just around the corner, but no such perfect storm ever appeared.[41][40] In 2009 he also predicted that the US government would take over and nationalize a number of large banks; it did not happen.[42][43] In October 2009 he predicted that the price of gold "can go above $1,000, but it can't move up 20-30%"; he was wrong, as the price of gold rose over the next 18 months, breaking through the $1,000 barrier to over $1,400.[43]
Although in May 2010 he predicted a 20% decline in the stock market, the S&P actually rose about 20% over the course of the next year (even excluding returns from dividends).[44] In 2012, Roubini predicted that Greece would be ejected from the Eurozone, but that did not happen.[45] The Financial Times observed that in 2020 when the COVID-19 pandemic arrived, he said that policymakers would not mount a large fiscal response. However—they did.[46] Also in 2020, he predicted that a US-Iran war was likely.[46]
The predictions and thoughts of individuals are merely food for thought, no one thinks that anyone can make highly accurate predictions consistently. Everyone is aware that predictions are often wrong.
The problem right now is that it is very hard to find any economist, or knowledgeable investor, who takes a positive view of where we are at this moment in time, all things taken into account. The mere fact that Trump is trying to badger The FED into rate cutting, is a huge red flag. It means that he is worried that his policies are economically disruptive. That the current numbers may not reflect the reality of the coming months. And that he must be hearing this from his own economic team. Rate cuts imply that the economy needs help! Rate cuts in a healthy economy would lead to overheating and potentially inflation. The GOP reluctantly approved this Big Deficit Bill, because of threats and coercion and pork barrel spending. Most of them know it is not the definition of fiscal responsibility.
At the same time we are driving off cheap labor, facing a huge tax on imports, and what amounts to more stimulus. If The FED is forced to raise rates due to a resurgence of inflation in the second half, GDP and the markets will be taking the hit. Bonds and stocks will both be hit hard. Myself, I am staying on the safer side of risk. I am ready to sell bonds if it looks like a rate increase is coming, rather than a rate cut, later this year. Same with stocks, I have my long term core positions that are already pared back, that could be even pared back more if things start to deteriorate. I continue to cull out any positions that I am not completely comfortable with, adding that to cash.
Let's keep adding to this thread with developments on inflation, jobs, wages, tariffs and related economic news.
Dr. V. Let’s add uncertainty and the decline in the value of the dollar to your list. And based on the last six months just plain old fashioned fear and distrust in the government that is unprecedented. If one is paying attention it’s hard to have much faith in the future as long as the regime remains in power.
DrV, You can’t have it both ways—either you stand by your predictions or admit you don’t believe them.
I get it now—some people post long narratives that sound smart but are really just designed to please the crowd.
I take a different approach: I don’t make predictions—because let’s be honest, no one truly knows the future. Instead, I base my investment decisions on the current market reality, not on forecasts or theories, and disregard politics.
I’m always dancing near the exit. When I’m right, I avoid most of the damage, investing in MM for weeks to months until risk is lower. When I’m wrong after I sell everything, I’m back investing at 99+% within days. Being wrong is already built into my system. That’s the difference.
But I will be back in 2026 to check your predictions, including hundreds of predictions I have seen in the media and here too.
Comments
Source
Since I was a teenager then, I didn't pay too much attention to the economy.
Although I didn't own a vehicle, I do recall the gas rationing of the early 70s.
Our economic situation appears to be much different than that of the 70s.
Many people/institutions warning about future Stagflation¹ imply inflation
may be 3%-5% with slow growth (but not no growth).
Frankly, no one really knows exactly what will transpire.
It may be prudent to keep expectations in check although recent market activity
seems to contradict this thought!
¹ Perhaps someone could coin a better term for this prognosis?
What many today overlook, I think, is the compounding effect of inflation. So after 5 years of 7.5% annual inflation things aren’t 7.5% higher. They’re closer to 40% higher than they were at the start of the period.
Don’t remember gas prices very well. But as a kid working at a filling station in the 60s for $1.50 per hour I recall prices in the 30-35 cent range - and that included whatever taxes were imposed.
Perhaps little known - - Regan / Volker are often given credit for slaying the inflation dragon. But it was actually Regan’s (defeated) predecessor Jimmy Carter who appointed Volker as Fed Chair.
From 01/2020 to 01/2024 = Biden 4 years. I see about a 23% CPI increase. The fastest 4 years since 1990.
See the CPI at
https://tradingeconomics.com/united-states/consumer-price-index-cpi
=========================
Since 01/2025, we have seen hundreds of predictions, mainly by (dem) economists, about inflation, stagflation, recession, depression, and other horrific stuff within 6-12 months.
This means 01/2026.
Can you take these seriously? I don't.
Don't worry, I will be around in 01/2026 to report about it.
Going from (1970s) memory … Inflation began ticking higher under Johnson (a Democrat), worsened significantly under Nixon (a Republican), worsened further under Ford (a Republican), peaked under Carter (a Democrat) and began subsiding under Regan (a Republican) - although it was Carter (a Democrat) who appointed Paul Volker to be Fed Chair. It had gotten so bad under Ford that he and wife Betty developed and actively promoted the slogan: WIN.
I’m not even opposed to inflation in moderation. A small amount may be beneficial to economies. When the assets I own through stocks, etfs, CEFs, OEFs, collectibles or real estate inflate in dollar value I am happy.
The question is not whether or not these are all inflationary pressures. They are classic inflationary pressures. The question is how much inflation they produce. The FEDs hands will be tied. In a tight labor market unemployment will not necessarily rise severely, but wages will go up as businesses compete for scarce resources. The FED may actually have to raise rates, unless they kowtow to political pressure and let inflation run which would be disastrous.
The FED may be unable to ride to the rescue, with unemployment only incrementally higher & inflation rising, if GDP slows as it is projected to do by nearly every source.
From the linked article: "The economy is likely to enter a period of slow growth in the 1% to 2% range. Inflation will hover between 3% to 4%, and unemployment will rise to 4.5% to 5%. While these economic conditions don’t match the double-digit interest rates and inflation and chronically high unemployment of the 70s, the stagflation-lite economic framework will still shock consumers.
Yes, the economy is likely to experience a sugar high following the coming tax cuts, which will temporarily send growth to 3% or higher. But the combination of new tariffs, tighter immigration policies, and sustained annual budget deficits will soon act as a drain on private sector investment as firms and households are priced out of the market."
This implies that there may still money to be made in the 3Q of 2025. But that the whole shebang will coalesce into bad juju at some point not too far off. If inflation hits, GDP falls and the FED raises rates, I would assume that both stocks and bonds take a hit. Cash and cash equivalents may still be a good bet.
Some relevant comments from Roubini in this article:
https://www.bitget.com/news/detail/12560604851369
Now let's apply all of that to our current circumstances. If we get inflationary pressure, and GDP is severely dampened by tariffs and trade barriers (new variables) raising rates could make things worse. Plus, rates are already higher and likely having a negative impact on housing affordability. No doubt this is why the FED is reluctant to cut rates. We are in a potentially similar situation, with a couple new variables to watch carefully.
This is why he is among the "best" market predictors (here).
Lastly, in 1-2 years from now we will revisit this thread.
The problem right now is that it is very hard to find any economist, or knowledgeable investor, who takes a positive view of where we are at this moment in time, all things taken into account. The mere fact that Trump is trying to badger The FED into rate cutting, is a huge red flag. It means that he is worried that his policies are economically disruptive. That the current numbers may not reflect the reality of the coming months. And that he must be hearing this from his own economic team. Rate cuts imply that the economy needs help! Rate cuts in a healthy economy would lead to overheating and potentially inflation. The GOP reluctantly approved this Big Deficit Bill, because of threats and coercion and pork barrel spending. Most of them know it is not the definition of fiscal responsibility.
At the same time we are driving off cheap labor, facing a huge tax on imports, and what amounts to more stimulus. If The FED is forced to raise rates due to a resurgence of inflation in the second half, GDP and the markets will be taking the hit. Bonds and stocks will both be hit hard. Myself, I am staying on the safer side of risk. I am ready to sell bonds if it looks like a rate increase is coming, rather than a rate cut, later this year. Same with stocks, I have my long term core positions that are already pared back, that could be even pared back more if things start to deteriorate. I continue to cull out any positions that I am not completely comfortable with, adding that to cash.
Let's keep adding to this thread with developments on inflation, jobs, wages, tariffs and related economic news.
You can’t have it both ways—either you stand by your predictions or admit you don’t believe them.
I get it now—some people post long narratives that sound smart but are really just designed to please the crowd.
I take a different approach: I don’t make predictions—because let’s be honest, no one truly knows the future.
Instead, I base my investment decisions on the current market reality, not on forecasts or theories, and disregard politics.
I’m always dancing near the exit.
When I’m right, I avoid most of the damage, investing in MM for weeks to months until risk is lower.
When I’m wrong after I sell everything, I’m back investing at 99+% within days.
Being wrong is already built into my system. That’s the difference.
But I will be back in 2026 to check your predictions, including hundreds of predictions I have seen in the media and here too.