Stagflation fears rotate when Trump tariffs come into force and savings slow

Fear of growth in the economy accompanied the concerns about the revival of inflation, in turn, potentially firing the ugly condition that the United States has not seen in 50 years.

Fear from “Stagflation” came to the post of president Donald Trump seems to be defined Put on tariffs virtually anything you like This comes to the country at the same time when several indicators indicate a rollback of activity.

This double threat to raise prices and slow growth causes anger among consumers, business executives and politicians, not to mention Investors who dumped the stock and recently scooping the bonds.

“This is directed, it’s a stagflation,” said Mark Zandy, Moody’s Chief Economist. “It is higher inflation and weakening economic growth, which is the result of policy – tariff policy and immigration policy.”

The phenomenon, not noticed from the dark days of hyperinflation and the growth of sagging in the 1970s and early 80s, was mostly manifested recently in “soft” data such as surveys and index of deliveries.

At least consumers, long -term inflation expectations are at the highest level in almost 30 years, while the overall moods see long lows. Consumer expenses fell in January Most of the nearly four years, although the profit has grown sharply, the trade department said on Friday.

On Monday, Survey Institute of Production Purchase Supplies She showed that in February the plant was practically no expanding, and new orders fell for almost five years, and the prices jumped on the highest monthly profitability for the year.

After the ISM report, the federal backpack of Atlanta Gdpnow The rolling sensor of economic data downgraded its projection for the economic growth of the first quarter by the annual reduction by 2.8%. If this holds it, it will be the first negative amount of growth from the first quarter of 2022 and the worst drop after COVID closing in early 2020.

“Hope for inflation has increased. People are nervous and uncertain in height,” Zandy said. “We are moving to Stagflation, but we are not going to approach the stagflation, which we had in the 70s and 80s because the Fed will not allow it.”

Indeed, the prices markets are more likely that the Fed will start to reduce interest rates in June and will be able to get rid of three quarters of the interest rate of the key rate this year as a way to avoid any economic slowing.

But Zandy believes that the Fed’s reaction can make the opposite – raising the rates to stop inflation, in Vienna, former chairman Paul Volker, who aggressively went in the early 80’s and involved the economy in the recession. “If it looks like real stagflation with slow growth, they will sacrifice the economy,” he said.

Sale of stocks

The rapprochement factors cause waves on Wall Street, where this month were in a sale mode that erases a profit after Trump won the November election.

Although the industrial average Dow Jones fell again on Tuesday and in the first days of March was off about 4.5% Index volatilityThe sensor of the market is only about 23nd day on Tuesday, not much higher than its long -term average. The markets were Well of their session lows In the afternoon of trading.

“It is definitely not the time to press the panic button,” said Mark Hacket, the main market strategist at Nationwide. “At that moment, I’m still in the camp that it’s a healthy expectation reset.”

However, this is not just a stock that shows signs of fear.

Treasury yields recently since September. The 10-year revenue on the 10-year note fell to approximately 4.2%, about twice the percentage of peak in January and below the 3-month note, a reliable recession returned to World War II called the inverted yield curve. The yield is moving opposite the cost, so falling profits indicates a greater appetite of the investor to securities with fixed income.

Housket said he was afraid of the “vicious circle” of activity created by Swooning’s mood, which could turn into a full -scale crisis. Economists and business executives see tariffs that affect food prices, vehicles, electricity and range of other items.

Stagflation “, of course, what to pay attention to now, more than it was for a while,” he said. “We have to observe. This is such a collapse of the mood, and such a change is how people view things, and the emotions are so raised now that it will begin to influence behavior.”

White House sees “the greatest America”

For their part, the White House officials claim that short -term pain will be painted when making long -term payments. Trump counted on duties as a way to create a stronger production base in the US, which is primarily an economy at the service.

The Secretary of Trade Howard Lutnik admitted in an interview with CNBC on Tuesday that “there may be short -term price movements. But in the long run it will be quite different.” Market expectations of inflation correspond to this mood. One metric that measures spread between nominal 5-year treasury before inflation exitIt is at the lowest level for almost two years.

“It will be the biggest America. We will have a balanced budget. The interest rates will collapse, and I mean 100 basic points, 150 basic points below,” Lutnit added. “This president is going to deliver all these things and lead to production here.”

In addition, the secretary of the Treasury Scott Baby told Fox News that “there would be a transitional period,” and said that the administration’s focus on the Main Rate than the Wall -Strit.

“The Wall -Rate is done perfectly. Wall -Story can continue everything well, but we focus on small businesses and consumers,” he said. “We are going to balance the economy, we are going to bring production jobs home.”

Important clues where the economy is managed should come from a salary report on Friday. If the number of jobs is good, it can increase the opinion that the tough data remained solid, even if the moods were convenient.

But if the report shows that the job market softens while the salary contains above, it can add to the chatter.

“We need to be observant. There is a potential that the term stagflation itself, in itself, can show some of this,” said Housket, a nationwide strategist. “I’m not in the camp” we have in the period “, but this is a scenario of the disaster.”