To The Moon

Lately, there are many news article speculating that US will slip into Stagflation anytime from Q2 2025 onwards. (see below) After reading one post too many about it, it seems to take on a life of its own. What is Stagflation ? It is an economic term used to describe a combination of (a) rising inflation, (b) slower economic growth and (c) high unemployment. Objectively speaking, item #a does not seemed to be happening, at least not based on CPI’s March 2025 data. There will be another take on US inflation when US’s personal consumption expenditure (PCE) is released on Wed, 30 Apr 2025. On US economic growth, when the GDP report is out on Wednesday, we will know. Rounding off, Fri’s US Non-farm payroll will shed light on Jobs/ Labour & Unemployment. Market Consensus. Like it or not, many economists have largely pinned the blame on Trump’s tariff policy. (1) According to Columbia Business School, Economics professor, Brett House: Tariffs have single-handedly increased the risk of both higher inflation and lower growth. (2) Separately, the latest CNBC Rapid Update, that averages forecasts from 14 economists: The Trump administration’s tariff policies are fueling stagflation conditions. “It is a more pronounced risk than at any time over the past 40 years” according to EY Partheon, Chief economist, Greg Daco, (who is incidentally, VP at the National Association for Business Economics). (3) KPMG, Chief economist, Diane Swonk affirmed that: Uncertainty is already showing up in consumer confidence. At KPMG, they are getting a kind of whiff of stagflation, where people are less secure about their jobs and they’re more worried about inflation down the road. Unsure where Ms Swonk got her consumer confidence data from ? US’s official Consumer Confidence Index will be released by The Conference Board, on Tue, 29 Apr 2025. US’s Last Stagflation. The last time US experienced stagflation was back in the 70s, particularly from 1973 (due to 1973 oil embargo) and it lasted until 1982. The oil embargo, that led to (1) a quadrupling of oil prices, (2) surging inflation, and (3) rising unemployment, as the country grappled with the costly Vietnam War and the loss of manufacturing jobs. Inflation peaked at 12.2% in 1974, while unemployment reached 8.5% in 1975. It all came to past when then Fed Chair, Paul Volcker implement a dramatic tightening of monetary policy in the late ’70s & ’80s known as the “Volcker shock”. Although inflation did come down as the Fed pushed interest rates higher, the move also prompted a severe recession. Same But Not The Same. According to Morgan Stanley, Hd of Wealth Management market research, Dan Skelly: Stagflation would not happen in the same way today: This is because US is no longer at the whim of foreign oil. Unions, that prompted wage price spirals back then, are no longer as big a portion of the private work force today. Uncertainty around Trump’s tariffs may erode corporate and consumer confidence: That would prompt spending & investment to slow. The likelihood of a growth slowdown part of stagflation is fairly high. At the same time, Morgan Stanley expects to see more effects in the stock market through earnings than in the economy. Firms are revising their economic forecasts, including the possibility of a recession, as a result of Trump administration policies. (see below) The modern stagflation is not necessarily accompanied by a formal recession; rather, it can be slowing or stagnant growth. Calamity Roundup. (1) KPMG, Chief economist, Diane Swonk: Expects a shallow recession, with inflation peaking at the end of Q3 2025. The inflation spike is not as drastic as what had happened during the Covid pandemic. However, it will likely slow down hiring and cause a short period of stagflation. (2) EY Parthenon, Chief economist, Greg Daco: Stagflation, if it happens, would be the “worst of both worlds” with higher unemployment and costs. That represents a significant hardship for many families and businesses across US. At its best, there might not be a stagflation. Case in point, a 2022 survey found 80% of economists believed that stagflation was a long-term risk. In the end, it was avoided at that time with (i) a mix of strong economic growth, (ii) disinflation and (iii) a robust labour market encouraged by the Fed. Constructively, the Trump administration could lower the risk of stagflation by (a) making policies clearer, (b) allowing more immigration to keep the workforce strong, and (c) avoiding tariffs on key trading partners. What To Invest During Stagflation. Historically, sectors that thrive during stagflation include: Energy - Companies in oil, gas, and commodities often outperform due to supply shocks and rising input costs. During the 1970s stagflation, energy stocks surged as oil prices spiked. Examples - $Exxon Mobil(XOM)$, Chevron (CVX), TotalEnergies (TTE). Consumer staples - Businesses producing everyday goods (e.g., food, beverages, household products) remain resilient as demand for necessities persists despite economic weakness. Examples - $Wal-Mart(WMT)$, $Costco(COST)$ Utilities - Regulated providers of electricity, water, and gas maintain stable cash flows, with inflation-linked pricing structures shielding them from volatility. Examples - $American Water(AWK)$, $NextEra(NEE)$. These industries benefit from pricing power, essential demand, or inflation-linked revenues. Closing off this post on a brighter note, in the survey with US’s CEOs, the data set included a few bright spots: Slightly over half (> 50%) of respondents said they foresee business conditions bettering in 2026. This is an increase from the 39% share seen a month earlier in March 2025. Many CEO may get some tariff relief as well. (see below) On Tue, 29 Apr 2025 morning, the White House confirmed plans for Trump administration to soften the impact of automotive tariffs. (see above). This comes as the auto industry grapples with regulatory uncertainty and additional costs due to Trump’s levies. The current 25% tariffs on imported autos into US remains in effect. A new measure (details still cooking) will prevent other adjacent levies, such as an additional 25% tariffs on steel and aluminum, from “stacking” on top of the others. With another exception added to Trump’s ill-conceived tariffs, why did his advisors let him make a fool of himself on the international stage ? A question of finesse, perhaps ? Must Read: Click on below titles to access. Repost to share, Like as encouragement ok. Thanks. Jobs & Confidence LOW. NVDA trends lower ? LUMN, COMM, FUBO: 3 Stocks Billionaires buy. TMQ, CVRS, NGD : US stocks Billionaires Buy. Do you think US is able to avoid a stagflation or recession altogether ? Do you think Energy, Consumer staples & Utilities are the way to go forward for now ? If you find this post interesting, give it wings! ️ Repost and share the insights ? Do consider “Follow me” and get firsthand read of my daily new post. Thank you. @Daily_Discussion @TigerPM @TigerStars @Tiger_SG @TigerEvents