In 1978 inflation was running rampant in many parts of the world. The term ‘Winter of Discontent’ refers to this period. From Wikipedia:
The Winter of Discontent was the period between November 1978 and February 1979 in the United Kingdom characterised by widespread strikes by private, and later public, sector trade unions demanding pay rises greater than the limits Prime Minister James Callaghan and his Labour Party government had been imposing, against Trades Union Congress (TUC) opposition, to control inflation.
Wikipedia
Meanwhile, in the US, Janet Yellen warned that inflation would be a risk for the remainder of the year:
“This winter, the European Union will cease, for the most part, buying Russian oil. And, in addition, they will ban the provision of services that enable Russia to ship oil by tanker. And it is possible that that could cause a spike in oil prices,” she added.
CNN.com
The fallout from a potential spike in oil prices will likely be higher energy costs and more inflation but it doesn’t stop there. High inflation is also preventing the Fed from reducing it’s balance sheet. From Bloomberg:
In short, the $30 billion a month of Treasuries that the Fed isn’t replacing is being partially offset by the increasing face value of its inflation-protected holdings.
Bloomberg.com
Essentially, the world seems intent on repeating the late 70s and early 80s again. If inflation continues to spike, interest rates will continue to climb and the defacto investment vehicle may be bonds instead of stocks. Why buy dividend stocks that pay 3 or 4 percent when you can buy a government backed bond paying 6 or 7 percent?
We’ll keep an eye on the situation as it unfolds. In the meantime stay tuned and stay solvent…