What Decade is This?

At times it can feel as if America’s current circumstances are unique.  However, patterns often emerge which appear similar to those of other periods.  At the foundation of history are people, individuals influenced in a large part by emotions, no differently than we all are today. 

Today has some similarities to a couple of decades: the 1960s and 1970s.  In the 1960s, President Johnson launched the Great Society, which included Medicare, Food Stamps, and education grants. Today, government outlays on social programs help drive up federal spending as a percent of gross domestic product to levels typically seen during recessions.  Yes, the downside is that it adds to the deficit and accumulates more debt, but it also supports some of our nation’s most vulnerable.  Inflation in the 1970s grew at an above-trend pace, something our economy has also faced in the 2020s. 

Global conflict is another similarity between the decades.  In the 1960s and 1970s, the Vietnam War was being waged.  Today, America supports multiple conflicts and could be on the precipice of another front as leaders in Washington D.C. decide how to respond to the attack on an America military base in Jordan.

Shocks influenced inflation in the 1970s and 2020s.  In the 1970s, an OPEC oil embargo caused energy prices to surge as shortages spread throughout the globe.  In the 2020s, our economy has been impacted by large swings in oil price as well and has to manage around various other shortages along the supply chain. This last point is currently being complicated by changing shipping routes caused by Houthi rebels disrupting passage through the Red Sea.

As was the case in prior periods, the Fed must navigate the economic and political environment, attempting to make good on its dual mandate of stable inflation and full employment.  In the 1970s they seem to have gotten themselves into a pickle by easing policy too early, only to see inflation accelerate once again.  Today, the Federal Reserve is walking a fine line, trying to keep the economic expansion continuing without encouraging a reacceleration of inflation after it has trended lower since summer 2022.

Leaders making decisions at the government, corporate, household, and central bank levels in the past were all influenced by the same emotions Americans face today.  Today’s similarities to other periods suggest our nation is not experiencing original challenges, but rather a continuation of the long-term influences of individuals.  Atlas will continue monitoring how these emotions manifest in financial markets, making adjustments to risk in the portfolios as the markets evolve.