Wall Street is growing more worried about 1970s-style stagflation risks

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 'Making Money' panelists Chris Low and Steven Blitz break down the Federal Reserve's moves to keep inflation in check.

Some Wall Street strategists are growing concerned the U.S. economy could be headed toward a 1970s-style stagflation scenario amid recent signs that progress on inflation is stalling.

Back-to-back consumer price index reports in December and January came in above estimates, fueling fears that high inflation could be more difficult to conquer than previously believed. 

«We believe that there is a risk of the narrative turning back from Goldilocks towards something like 1970s stagflation, with significant implications for asset allocation,» JPMorgan chief market strategist Marko Kolanovic wrote in a note to clients at the end of February.

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Stagflation is the combination of economic stagnation and high inflation, characterized by soaring consumer prices as well as high unemployment. 

The phenomenon ravaged the U.S. economy in the 1970s and early 1980s, as spiking oil prices, rising unemployment and easy monetary policy pushed the consumer price index as high as 14.8% in 1980, forcing Federal Reserve policymakers to raise interest rates to nearly 20% that year. 

«There are many similarities to the current times,» Kolanovic said. «We already had one wave of inflation, and questions started to appear whether a second wave can be avoided if policies and geopolitical developments stay on this course.»

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Stagflation fears surged in 2022 as the Fed began aggressively hiking interest rates to quell raging inflation, but those mostly dissipated last year amid signs that price pressures were subsiding without a