Morning Brief – Stagflation and the USA

Morning Brief – Stagflation and the USA

Mon 26 Jul 2021

Stagflation and the USA


In the 1970’s for anyone who can remember, the USA experienced the economic environment called stagflation notable for high unemployment, high inflation and low economic growth. As inflation rises investors sell bonds resulting in lower prices and higher yields which in turn prompts those investors to sell equities as well. That means that a diversified portfolio is no help at all as both bonds and equities sell off. Unlike the 1970’s interest rates are so low that cutting rates is not a policy tool available to central banks. The yield on 10 year US Treasury Bonds stood at 1.28% Friday night which made it four straight weeks in a row where yields have closed lower than they started. With US Consumer Price Inflation at 5.4% in the year to June 30, and economic growth showing widely diverging rates in the wake of the Federal reserve’s economic stimuli, market watchers do not have stagflation as their base case but it is now on their radar.


Global Supply Chains


Fresh from a building project with the contractor doing much looking into the middle distance, sucking his teeth and blaming the inevitable delays on global supply chains, I decided to see what that really means-apart from the obvious of products not being available. Natural disasters with floods in China and Germany and now Belgium-Dinant if you are wondering-are surely not enough to halt delivery of goods? The answer is that they are, when combined with Covid infections and most recently a cyber attack targeting key South African ports. In other words a perfect storm for global shipping companies. Short staffed in any case, sea captains are now banning their crews from going ashore since that risks infection which means that approximately 100,000 sailors are stuck at sea and they are exhausted as vessel capacity is tight with few empty containers and operational turnover at key ports stretched. Ships transport 90% of the world’s trade so everything from oil, food, electronics and iron ore is affected. EUR/USD at 1.1775.




In the early hours of Sunday morning a meteor weighing it is estimated 10KG landed approximately 40kms west of Oslo in some woods near Finnemarka. Campers in the woods were naturally alarmed as the meteor in the form of a fireball travelling at 36,500 km per hour smashed into the ground. Clearly visible for all of 5 seconds to those Norwegian night owls who wondered whether their acquavit was more than usually potent as they experienced loud bangs and flashes of light. The Norwegian Meteor Network are on the case to find the meteor, but are playing down the meteor as being spooky rather than dangerous. Markets exhibiting the same degree of sang froid with USD/NKR steady at 8.86.

The King


It was this day in 1969 that Elvis Presley opened at The Showroom in the International Hotel, Las Vegas for a four week concert booking for which he was paid USD 1 million. That it’s a decent amount now but that was a lot then but the concerts were acclaimed as a huge success. The equivalent of that USD 1 million today is USD 7.4 million so worth Elvis getting out of bed for. Here is his 1962 hit, Good Luck Charm:


Don’t want a four leaf clover
Don’t want an old horse shoe
Want your kiss ’cause I just can’t miss
With a good luck charm like you


Come on and be my little good luck charm
Uh-huh huh, you sweet delight
I want a good luck charm
A-hanging on my arm
To have, to have, to hold, to hold tonight


Don’t want a silver dollar
Rabbit’s foot on a string
The happiness in your warm caress
No rabbit’s foot can bring


Come on and be my little good luck charm
Uh-huh huh, you sweet delight
I want a good luck charm
A-hanging on my arm
To have, to have, to hold, to hold tonight


If I found a lucky penny
I’d toss it across the bay
Your love is worth all the gold on earth
No wonder that I say




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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