TIME TO BONE UP ON STAGFLATION:
GS defines "stagflationary periods" as episodes of two or more consecutive quarters in which core CPI inflation ran at least 50 basis points above the consensus long-term expectation while real US GDP growth registered 50 bp or more below trend.
US equity investors have had little experience with stagflation in recent decades, which have been characterized mostly by deflation.
During the last 60 years, GS calculates that the SPX has generated a median real total return of +2.5% per quarter, but that quarterly return fell to minus -2.1% in stagflationary environments
Stagflation has been associated with stable real revenues but declining profit margins and real earnings, indicating companies struggling to raise prices quickly enough to offset rising input costs.
GS: Who are the winners and losers during stagflation?
At the sector level, Energy and Health Care have typically generated the strongest returns during periods of stagflation.
Industrials and Information Technology have generally lagged most during stagflationary environments.
Stagflation has been associated with shifts in consumer spending behavior and the outperformance of services companies relative to firms selling goods.
GS keeps their year-end S&P 500 target of 4700 [MS’s target is 4,000]
https://en.wikipedia.org/wiki/Stagflation