May Economic Update

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Here is a buzzword we haven’t heard in a while: stagflation. Since the term seems to be making its way into recent headlines, I thought I would unpack what it means.

Stagflation is a period when prices are rising while the economy is slowing. Normally, you don’t see those two things at the same time. Typically, if people are experiencing hardships, companies lower their prices to entice them to purchase. So it’s uncommon when they operate against each other. Last time we experienced stagnation, it was the mid 70’s.

There are some similarities between then and now. There was an oil supply issue that was a big factor in the 70’s. A massive oil shortage caused by an embargo was the “supply shock” that caused inflation. When oil is more expensive, so are airplane tickets, the cost to haul produce, and so on. That is where you get inflation.

The danger here is people start saying, “This is just like the 70’s and here comes the 14% interest rates and 10% unemployment.” 

I have much more experience with recessions than I do stagflation. I was a kid when it happened and just remember that it was weird. People had locks on their gas caps (because they we worried other people would siphon gas out of their tank). What I have learned is no two recessions are the same. My guess is no two stagflation events are the same either. 

Since my tribe is real estate, here is a quick list of what you should do:

  • Reduce some expenses: You know those subscriptions you’ve been meaning to cancel? That old tech you don’t use anymore but still get charged for?  Cancel them. However, don’t cut your marketing budget. You need that.
  • Call your past clients: In any market, they’re your best source of deal flow.
  • Stash some cash: We’ve got some runway through the summer. Less G-Wagons, more savings. Keep your powder dry so you’ve got it when you need it.

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