Good morning market watchers,

Last week we saw further evidence the US economy is neither growing as fast as expected nor done with inflation.

Recent data has raised whispers of stagflation — the combination of stagnant growth and stubborn inflation.

Concerns of this narrative are justified. The 1970s taught us just how painful stagflation can be for an economy and the individuals within it.

But one metric suggest it’s not time yet to summon memories of decades past.

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Stagflation: 2024 vs. 1970s

To determine whether the US economy is indeed experiencing stagflation, we have to define what we’re talking about.

We know it means slow growth and too-high prices. But it’s helpful to anchor the word to the 1970s — the era that gave the word notoriety:

• The decade saw inflation climb 7.4% annually

• Uneven economic growth and recessions

• Weak consumer confidence

• Weak stock market returns

If you lived through those years, you may recall the long lines at gas stations and the restrictive policy of Fed Chair Paul Volcker.

Things are different now.

To be fair, the current American economy has plenty of headaches. But compared to the 1970s:

• Stocks are performing better

• The unemployment rate is about half what it was in 1975

• CPI is meaningfully lower

The cofounders of DataTrek Research, Nick Colas and Jessica Rabe, shared what’s dubbed the “Misery Index,” which offers a snapshot of how stagflation has come and gone.

The metric adds up the unemployment rate and CPI.

As the chart shows, only in the 1970s has the gauge stayed above 12 for multiple years.

“The Misery Index stands at just 7.3 right now, so to our thinking the stagflation narrative makes little sense,” Colas and Rabe said.

It’s worth noting, too, that stocks in the 1970s were actually a losing bet.

During that decade, the S&P 500 compounded at 5.9% a year, lagging the 7.4% inflation rate.

That said, conditions are not necessarily fine today.

Some consumers are getting squeezed and there’s still a path for the Fed to spark a recession.

But the extra historical context makes us smarter, and slightly better at looking around corners.

Here’s the DataTrek team again:

“When unemployment starts to increase and inflation remains high, we’ll start to worry about this sort of unhappy ending to the current market story. There are no signs it is developing just yet.”

*At a glance:

Elsewhere:

• Elon Musk visited China this weekend. In a surprise trip, he met various Chinese officials to go over Tesla’s plans for self-driving vehicles in the country. (Bloomberg)

• Regulators seized another regional bank. A troubled Philadelphia bank, Republic First — different from the similarly-named First Republic — was taken over and sold to another bank, Fulton Financial. (WSJ)

• So far, so good for earnings. The S&P 500 is seeing earnings growth for the third consecutive quarter. Of the companies that have reported results, more than three-quarters have beat estimates. (FactSet)

Rapid-fire:

• Paramount CEO Bob Bakish could get the boot (CNBC)

• 60,000 headlines suggests the Fed will turn even more hawkish (Bloomberg)

• Nearly 70 million square feet of office space is being converting for housing (ResiClub)

• Bet against Elon Musk at your own risk (Opening Bell Daily)

• A market research firm expects the AI-fueled stock bubble to burst in 2026 (Business Insider)

Last thing:

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