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Many people who lived through the Great Depression remained frugal and fearful about bank solvency for the remainder of their lives. The generation that experienced the inflation of the 1970s were similarly scarred, constantly on the lookout for sharply rising prices and spiking mortgage rates.

Inflation-related paranoia is common in financial media headlines at the moment as the combination of supply chain tensions and the rising demand from post-pandemic economic recoveries pushes prices higher. Thankfully, Morgan Stanley strategist Andrew Sheets argues convincingly that a 1970s-style upward wage-price spiral is highly unlikely.

Mr. Sheets pointed out in a note earlier this week that the 1970s was a period of rising wages but also high unemployment, whereas now unemployment rates are falling quickly around the globe. In terms of asset prices, the current market features high stock valuations and interest rates near all-time lows, the reverse of the ‘70s.

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Morgan Stanley sees the market now as more analogous to the 2004-05 period when stagflation – low growth and rising prices – was also a widespread concern. Then, manufacturing activity had started to decline while energy prices pushed inflation data higher. By mid-2005, manufacturing activity was close to registering month over month contractions while the U.S. consumer price index was climbing at an annual rate of 3.5 per cent.

Equities were volatile in 2005 with price-to-earnings ratios falling generally, but economic growth eventually resumed (at least until the financial crisis) and stagflation fears proved unfounded.

Although a skeptic regarding stagflation, Mr. Sheets remains bullish on energy prices in the coming years. He cites the work of his colleague, commodity strategist Martijn Rats, who believes that futures prices are understating energy prices, which are likely to stay elevated for the foreseeable future.

In general, however, Mr. Sheets does not think the 1970s-style stagflation story is anything like a useful guide for investors. “The 1970s are a long way away from our expectations or market pricing,” he writes. “Scenarios of slowing growth and rising inflation clash with our global forecasts of the opposite. Recent moves in inflation expectations and [manufacturing data] don’t fit the story as nicely as one would like.”

-- Scott Barlow, Globe and Mail market strategist

Also see:

A stock market malaise with the shadow of ‘70s-style stagflation

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Money markets ramp up global rate hike bets, add pressure on central banks

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Stocks to ponder

Lightspeed Commerce Inc. (LSPD-T) A short-seller report may not have produced the “smoking gun,” as one analyst put it, to crush the stock of this high-flying point-of-sale system seller. But according to our David Milstead, the questions it has raised about the company are sufficient for shareholders to consider locking in their remarkable gains, rather than holding on in hopes that Lightspeed will fulfill its lofty expectations.

Titanium Transportation Group Inc. (TTR-X) Bolton, Ont,-based Titanium Transportation Group Inc. is a trucking company with a fleet of approximately 800 tractors and 3,000 trailers. The company is covered by three analysts who have a unanimous ‘buy’ recommendation, with price targets suggesting an 80 per cent return over the next year. Rising freight rates are working in this company’s favour, and a fragmented industry is providing acquisition opportunities. Jennifer Dowty looks at the investment case for the stock.

The Rundown

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Three stock picks from Matco Financial’s Anil Tahiliani

The markets have been extra volatile in recent weeks, but Matco Financial portfolio manager Anil Tahiliani isn’t shoring up extra cash for his clients, waiting for the skies to clear. Instead, his firm continues to invest in what it views as “solid, good companies” poised to grow over the long term. Here are three stocks he’s liking right now.

Time to pivot to a more conservative approach to the stock markets?

Low-volatility exchange-traded funds had a great multiyear run, but they’ve been trounced more recently by broad indexes like the S&P 500 and S&P/TSX Composite. Could yet another reversal be at hand? Rob Carrick shares some thoughts.

Looking for inflation-beating dividend growth stocks? Here are five essential online resources

One of the more strenuous investing exercises is digging for dividend-growth stocks. Dividend-growth stars are consistent in how often and how much they raise their quarterly payouts to shareholders. For the income-focused investor, these stocks are a superior breed to those that keep paying the same amount. But verifying a company’s record for dividend growth requires the online equivalent of digging. Rob Carrick presents five online resources that can help you find dividend-growth stocks and then verify their consistency in the short and long term.

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The kids are alright: Wall Street’s old guard sees generational change

When Wall Street veterans gathered last week for one of their first in-person conferences since the pandemic began, the focus, on emerging issues from “meme stocks,” to cryptocurrencies and free trading apps, signalled a new era for the world of finance. John McCrank of Reuters reports.

Others (for subscribers)

Wednesday’s analyst upgrades and downgrades

Tuesday’s analyst upgrades and downgrades

Tuesday’s Insider Report: As oil and gas prices spike, company leaders top up positions in these three energy stocks

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What’s up in the days ahead

A major Canadian online broker is taking sentiment indexes to new heights. David Berman will tell us more.

Click here to see the Globe Investor earnings and economic news calendar.

More Globe Investor coverage

For more Globe Investor stories, follow us on Twitter @globeinvestor

You may also be interested in our Market Update or Carrick on Money newsletters. Explore them on our newsletter signup page.

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Compiled by Globe Investor Staff

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