Stagflation is coming, but with that comes a silver lining for some equities if history is any guide. “Inflation and stagnation was ‘unanticipated in 2022…hence $35 trillion collapse in asset valuations; but relative returns in 2022 have very much mirrored asset returns in 1973/74, and the 70s remain our asset allocation analog for 2020s,” said a team led by Michael Hartnett in the bank’s Flow Show note on Friday. Zeroing in on smaller companies, Hartnett and the team said that stagflation persisted through the late 1970s, but the inflation shock had ended by 1973/74, when the asset class “entered one of the great bull markets of all-time.”
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