Hmmm... Buckle Up

Themes to watch: stagflation anxieties, consumer pessimism, new takes on old policies, messy capital expenditure cycles, and a market that’s suddenly lost its nerve

Let’s get right into it.

We’ve got data showing inflation isn’t cooling off the way people hoped, and at the same time retail sales and consumer sentiment are both heading south. Everyone’s now whispering about stagflation, that ugly blend of weak growth and persistent price pressures. If that truly shows up, the Fed is looking at a nightmare scenario where they either keep tightening and risk a recession or ease up and let inflation run wild. Not a fun choice!

A lot of the gloom is pinned on Trump’s agenda. Tariffs are back in a big way, companies are shrieking about higher costs, and we’ve got cuts to government spending that are hitting jobs in DC. It’s basically a total flip from the Reagan-era playbook. Reagan was all about free trade, big defense budgets, and fierce anti-Soviet rhetoric. Now we’ve got heavy tariffs, defense cuts, and a friendly stance toward Russia. The War on Drugs and tax cuts for the wealthy might still be a shared theme with the 80s, but much of everything else is flipped on its head. It’s jarring for markets that expected typical GOP policies to continue unabated.