Let’s just call it what it is. We’re in stagflation, whether the Fed wants to slap that label on it or not. You can dress it up with language, policy nuance, or market jargon—but when the data speaks, we better listen. The dollar’s lost 11% purchasing power since January, and the S&P has barely moved 4%. In a true growth environment, you’d expect equities to rally in response. But that’s not happening. Why? Because inflation’s running hot and growth just isn’t there.
This isn’t theoretical. The math is right in front of us. Historically, for every 1% move in the dollar, we see a 2.5% counter move in equities. So an 11% drop in the dollar should mean roughly a 27.5% surge in equity prices—if the market believed we had growth. Instead, we’re treading water. That’s not a healthy market.
That’s stagflation: rising costs with stagnant returns…
Gold knows it. Up 20% over the same period. Why? Because smart money’s hedging inflation risk. Copper’s up only 10%—half that of gold—and it’s stalling. No breakout. No confirmation of growth. That’s your divergence. Gold is screaming inflation. Copper is whispering weak demand.
The Fed? They’re still trying to tiptoe around the narrative. Powell claims there's no stagflation, just “adjustments to trade policy.” Yet he openly admits they don’t factor federal debt into policy decisions. You can’t keep issuing record debt, let the dollar deteriorate, and expect no consequences. Something’s gotta give—and it won’t be a soft landing.
And when we pull out the real tools—ZQ futures, for example—we see what the market is actually pricing in. Not talk. Not projections. Dollars on the table. July? Basically zero chance of a rate cut. September? 78% chance. By December? Two cuts baked in and a 36% shot at a third. That’s not confidence. That’s hedging downside.
So what’s the play here?
Safe sectors. Dividend-paying consumer staples. Utilities. Healthcare. Kroger. Walmart. Pepsi at support with a 4% yield. These aren’t moonshots. They’re shields. I like Rio not because I expect a rally, but because it pays 8% to sit still. In stagflation, that’s called winning.
Bonds? IEF and IEI are your short-term tactical plays. TLT has a longer tail but still valid. ZQ tells us those yields are going lower eventually—just not tomorrow. Want growth exposure? Fine. But lean into safety first. Let others chase momentum. We’ll be collecting yield while they figure out what hit them.
Bottom line—Powell can deny stagflation all he wants. But the market knows. The dollar knows. Gold and copper know. You and I know.
So the question isn’t whether stagflation is here.
The question is: are you trading like it is?
By Blake Young