Stagflation Risks are Creeping In

Bonds have priced in the “inflation” part of the stagflation file, but equities have yet to discount the associated downside growth risks.

Key Takeaways

• Auto and Travel Demand are Cracking: Fed officials are now talking openly about stagflation risks. They may not be wrong when you look at what is happening in the travel sector: consumers are buying fewer cars, no longer filling them up to the limit at the gas stations, and creating a bull market in carpooling. All the while, flyers are either canceling or postponing their planned trips and the major global air carriers are seeing the effects of this demand destruction.