The 1970s All Over Again?

Executive Summary: The current alignment of economic forces—resulting in a growing economy with low unemployment, falling inflation, and stimulative fiscal policy balancing out restrictive monetary policy—seems too good to be sustainable. Is stagflation what comes next? … We doubt it. We don’t see inflation turning back up and economic growth slowing down as the decade progresses. We continue to place greater odds on “The Roaring 2020s” scenario (65% odds), a reboot of productivity driven growth à la the 1920s, than we do on “The Great Inflation 2.0” scenario (35%), a replay of the 1970s/early 1980s stagflation story.