With surging inflation amid record-low unemployment over the past 18 months, discussions about “secular stagnation” have receded into the background. However, today’s high inflation stems from severe supply-side shocks (war, sanctions) and interruptions to supply chains (due to the pandemic), coupled with large but temporary increases in spending (fiscal stimulus, pent-up demand as pandemic lockdowns ended). Given these factors, the focus on inflation, while justified given its acceleration and breadth, may nevertheless distract attention from longer-term drivers of growth, inflation, and interest rates. In short, secular stagnation may still be the driving force impacting long-run outcomes for asset values.
Read this short article to better understand what secular stagnation is and what the implications will be for growth, monetary policy and capital markets.