Market Data 
Fears of stagflation hitting the US economy are rising.
The dire economic scenario, in which inflation rises while economic growth deteriorates and unemployment surges, would be a flashback to the 1970s for America. That time period proved to be a brutal lost decade for the US stock market.
But Sonu Varghese, global macro strategist at Carson Group, sees little risk of stagflation occurring anytime soon.
“Folks, we are far from stagflation,” Varghese said in a recent note.
Inflation concerns are overblown
Consumer sentiment has soured since President Donald Trump’s inauguration in January, partly because of concerns that tariffs will drive a rebound in inflation.
However, Varghese says that higher inflation expectations among consumers are more of an expression of political dissatisfaction than a view of actual economic conditions.
“The increase in inflation expectations would typically be very concerning for the Federal Reserve, but other surveys don’t show a similar surge,” Varghese said, pointing to the New York Federal Reserve’s consumer survey and the Atlanta Fed’s business expectations survey.
In addition, wage growth, a key inflationary pressure, is hovering near pre-pandemic trends that were consistent with low inflation.
Annualized wages rose 3.6% for all private workers over the past three months, compared to the pre-pandemic trend of 3.1%.
“Forget stagflationary levels of inflation, this pace of wage growth is consistent with 2% inflation,” Varghese said in a recent note.
Oil isn’t moving higher
One of the big shocks of the stagflation crisis in the 1970s was surging oil prices.
“Energy price shocks tend to drive upside inflation shocks and right now, we don’t have anything close to that,” Varghese said.
That’s not happening now.
At just below $70 a barrel, US crude oil is trading at levels last seen in 2018.
With US oil production near record levels and OPEC scaling back its production cuts, there’s no sign that oil prices will surge in the near future.
The labor market is holding up
While there’s been a slowdown in hiring, partially driven by the uncertainty coming out of Washington, D.C., the unemployment rate is essentially at a standstill at about 4.1%, which is historically low.
“Overall layoffs are running lower than where they were before the pandemic, and even if you normalize for the large workforce we have now, the ‘layoff rate’ is 1%, below the 1.2-1.3% range we saw prior to the pandemic,” Varghese explained.
While the data can always change, and DOGE is fueling fears of future labor-market weakness, there are no signs that stagflation is on the horizon, Varghese said.
