Commentary With consumer prices soaring to levels not seen since the early 1980s, many pundits are predicting the economy will enter a period of stagflation that could persist for years. Stagflation is any period marked by both rising inflation and rising unemployment, something our economy has not experienced since 1980. Despite the infrequency of periods of stagflation, investors have started taking precautionary measures. Investors, professionals, and speculators have bought into the stagflation narrative in a big way. Under the belief that higher consumer prices will ultimately lead to higher interest rates, investors are fleeing from the government bond market at a rate unlike any time in modern history. In what seems like a sure bet on lower bond prices, investors and money managers continue to unload their positions without any regard to price, while speculators are shorting the bond market by borrowing bonds and selling them on the open market. …
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