Since March of this year, the prices of various commodities such as gold, copper, crude oil, and cocoa have entered a "surging" mode.
Gold has broken through $2,300, and crude oil has returned to $90, while the stock market is quite average.
This reminds me of the era of stagflation.
On August 13, 1978, the famous American financial magazine Business Week published an article titled "The Death of Equities" on its front page!
The article provided reasons: 1.
Since 1970, at least 7 million shareholders have left the stock market.
2.
There has been an unprecedented number of large institutional investors participating in the stock market.
3.
Pension policies can not only invest in stocks and bonds but also in real estate, commodities, and even gold and diamonds.
4.
Large institutions can withdraw billions of dollars from the stock and bond markets.
Why is this the case?
Because the 1960s to 1980s were a period of great stagflation in the United States, with severe inflation, which was a bull market for commodities.
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Two oil crises, coupled with the US-Soviet Cold War, pushed the world onto a fast-moving bus of inflation.
The US stock market from 1960 to 1980 almost lingered between 600 and 1000 points for 20 years, showing how desperate stock investors were at the time.
It was written: The death of the stock market will not stop due to a temporary rebound in stock prices, and only the elderly who do not understand financial changes or cannot adapt to changes will insist on holding stocks.
Of course, during this period, not all stocks were bad.
Buffett also achieved good results during this period of stagflation because resource and financial stocks performed very well during the stagflation period.
Now, what is the best performance in A-shares?
Think carefully, isn't it Zijin Mining, China Shenhua, China National Petroleum Corporation, and Bank of China?
What is this?
Isn't it resources and finance?
Traditional consumption, medicine, new energy, and semiconductors have all taken a break!
At the same time, China and the United States are also in a new Cold War period.
In the 1970s, stagflation occurred, partly because of the oil crisis, but the most fundamental reason was the US-Soviet Cold War.
Both governments continued to expand deficits.
What to do if there is no money?
Increase taxes and print money!
What about now?
The situation is also very similar.
In the past few years, the United States has been printing money desperately, and the debt-to-GDP ratio has reached more than 120%, and the debt scale is approaching $35 trillion.
However, this time, the driving force behind the rise in commodity prices may not be the oil crisis, but green metals.
Because the demand for metals in new energy is expected to continue to grow beyond expectations, it may become the most important factor of inflation.
Therefore, we need to pay attention to a problem: Are we currently in a period of stagflation, or will we enter a period of stagflation?
This determines the direction of our asset allocation and the focus of investment.
Generally speaking, the reasons for stagflation are very simple, that is, economic growth has fallen into a stagnant period, but the country keeps printing money to stimulate the economy, which leads to a dual situation of economic downturn + inflation.
There are two key points here.
The first is the direction and preference of government policies.
For example, in the 1970s, European governments were more cautious, and there was less inflation.
Now, it seems that the United States has not changed, and the habit of printing money has not changed.
The second is the momentum and direction of economic growth.
There were originally problems because after the mobile internet, the United States fought trade wars, and the entire economy was in an era of stock competition.
However, now there has been an AI wave, which will inevitably promote economic growth, but to what extent can it change the global competitive pattern?
It is still hard to say.
Looking domestically, after real estate, the entire consumption has been suppressed, and the downturn is inevitable, but whether there is inflation depends on the policy.
Next, we need to be vigilant about the Fed cutting interest rates, inflation rebounding again, and having to raise interest rates again, which would be a real stagflation pattern.
As long as the CPI does not rebound sharply, the market is still safe, and there is no need to worry too much.
Even if there are some signs of stagflation, there is no need to be afraid.
Stocks are not dead, they have just changed their structure.
Japan actually rose very well in the 1970s, and it is more a structural change.
Now, China is at a critical stage of globalization.
In the past 20 years, China has been learning to manufacture and learn technology.
Next, it is the technology that goes global, and the advantages of scale will be very obvious.
The typical representative is the automobile, and the overall economy is upward.