Having heard twice in the past 24 hours from smart people about whiffs of stagflation, we are now in search of a third warning, which according to tradition passed down from ancient journalists of legend, will mean there is a trend in place: A stagflation-panic trend.
Yesterday, Joe Mezrich, quant guru at Nomura, sent around a note saying financial markets are priced for stagflation:
Inflation expectations in bonds are now priced higher than before the Lehman bankruptcy, while long-term earnings growth is now priced in equities as negligible. The current divergence of higher inflation pricing and lower earnings growth pricing is not a good sign. The market currently seems to be pricing in stagflation....MORE