In trying to understand where the U.S. economy right now, we are hearing the term “stagflation” a great deal but we think this is the wrong word. Let’s start with the definition of stagflation:
In economics, stagflation or recession-inflation is a situation in which the inflation rate is high or increasing, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.
The term, a portmanteau of stagnation and inflation, is generally attributed to Iain Macleod, a British Conservative Party politician who became Chancellor of the Exchequer in 1970. Macleod used the word in a 1965 speech to Parliament during a period of simultaneously high inflation and unemployment in the United Kingdom.[1][2][3][4] Warning the House of Commons of the gravity of the situation, he said:
“We now have the worst of both worlds—not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of ‘stagflation’ situation. And history, in modern terms, is indeed being made.”[3][5]
source: wikipedia
With millions of baby boomer retiring and continuing to do so through 2030 and beyond, we won’t have high unemployment for a prolonged period of time. We will have high inflation and high employment but growth will only be for those companies with deep pockets that can afford to bid for the best workers. There will be many winners and losers in the U.S. economy over the next 10 years and we think this period of time should be called ‘Dissonance Growflation’ because the economy will selectively grow in some industries / firms, we will have high inflation and there will be inconsistency in how, when and where the economy grows.
We’re developing a new investment thesis around ‘Dissonance Growflation; so stay tuned, stay profitable and stay solvent…