Stagflation begins

[WendyBG]

These reports pre-date the Iran war which is likely to spark inflation.

https://www.nytimes.com/2026/03/13/business/economy/consumer-prices-inflation-pce-february.html

U.S. Economy Was Vulnerable Before War With Iran

Economic growth at the end of 2025 was revised downward and consumer prices rose at the start of 2026.

By Talmon Joseph Smith, The New York Times, March 13, 2026

Economic growth was slower at the end of 2025 than data first showed and inflationary pressures persisted at the start of this year, a troubling snapshot of an economy on unsteady footing before war with Iran upended oil and financial markets.

Consumer prices increased moderately in January, the Federal Reserve’s preferred inflation gauge showed on Friday. Economists worry prices will march even higher in the coming weeks. And gross domestic product, the benchmark measure of economic growth, which is adjusted for inflation, was revised down to a 0.7 percent annual pace for the last three months of the year… [end quote]

This chart shows CPI and the PCE index overlaid. CPI directly impacts TIPS yields and Social Security. The Fed pays more attention to PCE because of its different weighting of housing and medical costs. Core PCE is 3% which is moving away from the Fed’s goal of 2%.

Inflation Nowcasting

Since the beginning of 2026 the Cleveland Fed’s Inflation Nowcast has trended up.

At the same time, the economy slowed.

https://www.wsj.com/economy/consumers/economy-was-even-slower-in-fourth-quarter-new-estimate-shows-5b485f19

Economy Was Even Slower in Fourth Quarter, New Estimate Shows

GDP grew at 0.7% annual rate late last year, down from initial reported pace of 1.4%

By Justin Lahart, The Wall Street Journal, March 13, 2026

• The Commerce Department reported the U.S. economy grew at an 0.7% annual rate in the fourth quarter, revised from 1.4%.

• The downward revision was driven by slower consumer spending and business investment.

• International trade weighed on the GDP calculation, contrasting with the slight boost it provided in the advance report… [end quote]

The Fed won’t cut the fed funds rate in this environment of rising inflation and uncertainty. But the slowing economy will put pressure on them.

FRED Graph

Underlying Inflation Dashboard

Wendy

[tjscott0]

So if this recession follows the 1970’s & early 1980’s inflationary period–NO rate cuts but rate increases if they follow the Paul Volcker template.

If memory services, and it might not, reduced productivity & higher unemployment and poor stock returns as valuations fell.

Well I hoped not to repeat that era!

So TIPs, commodies, mining/materials stocks, gold/silver, consumer staple stocks or perhaps also REITs & health care stocks also.
What have I missed?

[tjscott0]

Trump Asks the Fed for an Emergency Rate Cut. What Are the Odds?

LOL Just ludicrous.

[bjurasz]

@tjscott0

So TIPs, commodies, mining/materials stocks, gold/silver, consumer staple stocks or perhaps also REITs & health care stocks also.
What have I missed?

I’m moving more into value and dividend paying stocks. I like the idea of VTIP for my bond allocation.

I notice my actively managed portfolio of municipal bonds is slowly losing value right now. I have 19 individual bonds, but they are all long duration bonds and we have no plans to actually hold any of them that long. We just like the yields (typically 5%). I’m beginning to question that decision.