If you’ve been watching the bond market, inflation prints, or the slow grind in housing absorption, you’ve probably felt it in your gut: something’s off.
Wall Street strategists are starting to call it what it is — a slow drift toward stagflation. Not a recession, not a soft landing. A blend of sticky inflation and stagnant growth that feels all too familiar to those who lived through the late 1970s. You know… back when interest rates hit double digits and real assets became king.
The immediate culprit? Trade tariffs — and their ripple effects on pricing, policy, and monetary maneuverability.
Why Stagflation Should Be on Every Investor’s Radar
The data isn’t subtle. The US dollar has shed 8% against a basket of global currencies. Core inflation is back on the rise — especially in goods exposed to the new wave of tariffs. And even as unemployment inches up, consumer expectations for inflation are ticking higher. The Fed’s New York branch just reported that inflation expectations for the year ahead rose to 3.1%, up from 3% in June.
Investors, meanwhile, are still clinging to the hope of imminent rate cuts. Fed funds futures are pricing in a cut as soon as next month. Those expectations intensified after last week’s jobs report, which showed the labor market cooling across the board. Trump even fired the head of the Bureau of Labor Statistics over it — which, while dramatic, won’t change the fundamentals.
But here’s the catch: if Trump’s tariffs stick (and they survive legal challenges), the Fed’s hands may be tied. Inflation could reaccelerate. And any rate cut optimism might end in tears.
Trump’s Fed Overhaul Begins in Earnest
President Trump has already started shaping the next era of the Federal Reserve. This week, he announced that Stephen Miran — currently chair of his Council of Economic Advisers — will temporarily fill the Fed Board seat vacated by Adriana Kugler’s surprise resignation. Miran is known as a vocal critic of Jerome Powell and is expected to push a more aggressive, forward-looking policy stance if confirmed by the Senate. His appointment, even if interim, is another clear signal that the administration wants a central bank that plays offense.
Meanwhile, Fed Governor Christopher Waller is emerging as a leading candidate to replace Powell as chair when his term expires next May. Trump advisors reportedly favor Waller for his willingness to act on forecasts rather than lagging indicators — a notable shift from Powell’s “data dependent” approach. Also said to remain in contention are Kevin Warsh and Kevin Hassett.
Between Miran’s appointment and Powell’s likely ouster, the Fed is being re-engineered in real time.
A Broader Economic Agenda Takes Shape
Trump is also expanding his reach beyond monetary policy. He recently signed an executive order directing federal agencies to reevaluate how private equity, real estate, crypto, and other alternatives can be included in 401(k) retirement plans. While it remains unclear whether this will require legislative action or rulemaking from regulators, it’s a major opening salvo for capital allocators. With some $12.5 trillion sitting in American retirement accounts, even a modest shift could be a boon for the alternative investment space.
At the same time, tariffs are quietly driving up prices — particularly in categories directly impacted by the new policy wave. The latest inflation data confirms that goods most exposed to tariffs saw renewed price acceleration in June.
The Real Cost of Tariffs Is Coming Due
Whether they show up as higher input costs, slower growth, or fewer choices, tariffs don’t stay hidden forever. For developers, builders, and real asset managers like us, the downstream effects are already in motion: rising construction costs, disrupted supply chains, delayed entitlements, and an underwriting environment that’s harder to stabilize.
If this is, in fact, a modern form of 1970s-style stagflation, we need to prepare accordingly:
✔️ Lean into assets with pricing power
✔️ Secure long-term, fixed-rate financing where possible
✔️ Focus on cash flow durability over near-term upside
✔️ Stay nimble for market dislocations — they’re coming
Bottom Line
Investors are still chasing the high of a Fed pivot. But the structural forces in play — from tariffs to personnel changes at the Fed — point toward volatility, not relief. The pivot may come, but if inflation reasserts itself, it won’t stick.
In environments like this, capital gets punished or rewarded based on positioning. The noise is loud. The signals are subtle. But if you know where to look, the road ahead is starting to take shape.
— Daniel
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