Could Stagflation Return? | Presented by CME Group

Summary

• Defines stagflation as the unusual condition of high inflation and low economic growth.
• Cites the US period from 1973-1982 as a historical example, where inflation averaged 7-9% and the S&P 500 averaged just over 6%, leading to negative inflation-adjusted returns.
• Identifies oil price shocks as the core problem during the 1970s, which raised costs and slowed growth.
• Explains the Fed's policy dilemma in stagflation: unable to lower rates (fuels inflation) or raise rates (slows economy further).
• Notes the current (2026) situation mirrors this dynamic, with oil prices up 70% from the start of the year through mid-March due to conflict in Iran.
• States current GDP growth has "dropped to 7%," implying a significant slowdown is occurring.
• Highlights a key structural difference from the 1970s: substantially higher domestic oil production, reducing US supply dependence.
• Warns that if elevated oil prices persist for "more than a few weeks," the market and economy could begin pricing in a more serious stagflationary problem.
• The overall implication is a rising risk of stagflation, which historically creates poor real returns for equities and binds central bank policy.