Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as a quantitative equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989.

Cross-Asset Strategist & Quantitative Analyst

A Return to 1970s Stagflation? Nuances Suggest Not So Fast

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

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Cross-Asset & Quantitative Research

Cross Asset Strategy

Stagflation fears are rising again. It’s a natural reaction to the short-term data. September headline CPI came in hot, though the core CPI print was in line with expectations and PPI was soft. Inflation expectations are spiking while growth nowcasts are dropping.As a QE taper is more or less baked in for November, these worries have unsettled markets as the narrative is that the Fed could be making a policy mistake. We believe these concerns are temporary and investors should fade the stagflation fears.We are still on Team Transitory. Stagflation fears are temporary and should fade in the coming months. The macro backdrop coming out of the COVID Crisis is nothing like the stagflation era of the 1970s. The equity bull is still alive, and investors should position themselves for a reflationary rebound. As we pointed out in the past (see <a href="https://www.smartkarma.com/dashboard?collection=all-insights&amp;fulltext=not%20your%20father%27s&amp;item=57814" target="_blank" rel="noopener">Not Your Father’s Stagflation Threat</a>), the real risk is a series of supply chain disruptions from climate change-related events like heat waves and floods that keep inflation elevated and reduce growth.

Stagflation fears are rising again. It’s a natural reaction to the short-term data. September headline CPI came in hot, though the core CPI print was in line with expectations and PPI was soft. Inflation expectations are spiking while growth nowcasts are dropping.As a QE taper is more or less baked in for November, these worries have unsettled markets as the narrative is that the Fed could be making a policy mistake. We believe these concerns are temporary and investors should fade the stagflation fears.We are still on Team Transitory. Stagflation fears are temporary and should fade in the coming months. The macro backdrop coming out of the COVID Crisis is nothing like the stagflation era of the 1970s. The equity bull is still alive, and investors should position themselves for a reflationary rebound. As we pointed out in the past (see Not Your Father’s Stagflation Threat), the real risk is a series of supply chain disruptions from climate change-related events like heat waves and floods that keep inflation elevated and reduce growth.

Fade the Stagnation Fears