Lessons from Inflation Past

Flashback to the '70s

October 2018: Market Perspective


Beyond bell-bottoms and leisure suits, the 1970s was a decade of historic political and social change in the U.S. It also was a decade of momentous economic events. Growth stalled, energy prices soared, employment slumped, and inflation and interest rates skyrocketed. Economists coined the phrase “stagflation” to describe the stalled-growth, soaring-inflation backdrop, while grassroots activists launched a “Whip Inflation Now” crusade in response to escalating consumer prices (complete with “WIN” buttons for those leisure suit lapels).

U.S. inflation (realized and expected) declined after peaking in the late 1970s and early 1980s, when sharp hikes in short-term interest rates eventually helped “WIN.” Now, however, this decades-long trend may be ending because the free-trade regime that helped suppress inflation is under threat from politicians around the globe.

Indeed, the Producer Price Index showed year-over-year price increases in nine of 10 categories as of August 2018. High diffusion of producer price inflation is unusual for this stage of the economic cycle and hasn’t been seen since the late 1970s. In this Market Perspective, we’ll time travel to address why the 1970s are relevant to today’s inflation environment and explain the implications for growth investing.

Flashback to the '70s: Lessons from Inflation Past

October 2018: Market Perspective

Download PDF
  • Related Articles
  • More From Author

Large Cap Growth: Ignoring Near-Term Impacts

Now more than ever, it is easy to get distracted by daily news flow. Between attention-grabbing headlines and the viral nature of social media, the news can be a lot to absorb. Our Premier Growth strategy team, however, remains focused on investing in competitively advantaged companies.

Rising Rates and Volatility: Trouble for Passive Value Investors?

Active and passive strategies rotate in and out of favor as market conditions change. Rising rates and volatility may signal changes ahead.

Seven Reasons to Look at U.S. REITs in 2019

Will a pause in rate-hike policy deliver a tailwind for U.S. REITs in 2019? Get the latest outlook from our Real Estate Desk.

    Flashback to the '70s: Lessons from Inflation Past

    Looking back to a time of rising inflation to better understand current conditions and opportunities.

    Secular Over Cyclical Growth

    Are growth stocks expensive or attractive? CIO Greg Woodhams puts them in context, drawing a distinction between secular and cyclical growth.

      Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

      References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.