Financial social media has once again become obsessed with the familiar inflation chart – the current U.S. inflation trajectory overlaid against the infamous inflation spiral of the 1970s. For inflation doomers, the trend is clear — a second inflation wave is inevitable, and double-digit CPI is only a matter of time.
ING economist James Smith described the trend as a “chart crime,” arguing that visual similarities alone are not enough to justify such sweeping conclusions.
“Historical parallels are neat and often irresistible. But no period is a perfect match,” he wrote in the recent analysis.
The comparisons are understandable. Jerome Powell rode into the sunset without bringing inflation to the 2% target, energy prices are rising again amid tensions surrounding Iran, and policymakers continue to wrestle with the aftershocks of the post-COVID economy.
Key Structural Differences
Yet, according to ING’s framework, the underlying structure of the modern economy is fundamentally different from that which produced the stagflation crisis of the 1970s. That distinction matters because, while 2026 risks are real, they stem from supply-side pressures and structural constraints.
According to Smith, the first major difference is oil dependency. Even with crude prices rising above $110 per barrel, inflation-adjusted oil prices remain well below the peaks reached during the late 1970s energy crisis.
Western economies consume far less oil than they once did. ING data shows that per-capita oil consumption has fallen by around one-third in the U.S. and by more than 50% in the U.K. over the past decades. Modern economies are increasingly reliant on electricity and tech infrastructure rather than crude-intensive industrial activity.
Labor market structure is yet another key difference for Smith. It no longer supports the self-reinforcing wage-price spiral of the 1970s. Unionization rates have collapsed from around 35% in 1980 to 15%. Wage indexation and strike activity have become far less common, reducing the risk that higher prices will push wages up and embed inflation more deeply in the economy.
Finally, central banks have changed, too. Smith argues that modern policymakers remain “paranoid” about repeating the mistakes of former Federal Reserve Chair Arthur Burns, who allowed inflation expectations to become entrenched during the 1970s. Unlike that era, today’s central bankers are aggressively monitoring inflation expectations and remain willing to tighten monetary policy further if inflation accelerates again.
Different But Not Disappearing
Still, rejecting the 1970s analogy does not mean inflation risks are disappearing. Adam Ballantyne, a principal at Cambiar Investors, argues that a “unique second wave of inflation may already be underway,” though driven by very different forces.
In contrast to the demand-driven inflation surge of the early 2020s, Ballantyne sees supply constraints, tariffs, geopolitical fragmentation, reshoring initiatives, and years of underinvestment in commodity capex.
Commodity markets already reflect these pressures. Steel, aluminum, food products, oil, and cotton have all experienced sharp price increases over the past year. The momentum has carried into 2026, as evident from the performance of Invesco Optimum Yield Diversified Commodity Strategy (NASDAQ:PBDC), which is up 35.17% year-to-date.
“Inputs such as steel, cotton, fuel, and agricultural products influence everything from housing materials and transportation costs to apparel, industrial equipment, and consumer goods. As a result, sustained increases in these areas can exert renewed upward pressure on inflation, even in a slower-growth environment,” Ballantyne explained.
He also pointed out how corporate management now appears far more willing to pass higher costs directly onto consumers after learning they could preserve margins during previous inflationary periods.
No Easy Way Out
Meanwhile, U.S. inflation accelerated to 3.8% in April, while one-year inflation expectations surged by 124 basis points since March. JPMorgan economists have argued that higher energy costs, weaker consumer purchasing power, and deteriorating business confidence have effectively taken the market’s preferred scenario (inflation cools and the economy continues to expand) off the table.
All put together, the situation makes the 1970s look simplistic in comparison. If inflation remains supply-driven, central banks might have far less leeway to rescue markets via aggressive rate cuts during economic slowdowns.
In that case, the market will increasingly reward businesses with genuine pricing power, durable cash flows, disciplined capital allocation, and strong balance sheets — rather than companies that merely benefited from the era of cheap money and abundant liquidity.
Image via Shutterstock
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