From prog rock to punk and disco squeezed in-between, popular music swung through extremes in the 1970s.
And the musical volatility played out against an erratic inflationary backbeat that tipped economies and markets out of synch, according to a new analysis by the research arm of French investment giant, Amundi.
“What followed from the early 1970s on was a decade of volatile and sometimes very high inflation (with two spikes, in late 1974 and early 1980), only tamed at the price of a complete revamp of the monetary policy framework, ultra-high interest rates and a sharp recession (at least in the US),” the Amundi Institute paper says.
Like many other market observers, the Amundi report authors – Monica Defend and Vincent Mortier – note the 2020s seem to have got off on the same foot as the 1970s.
“Even before the current decade began, and before Covid and the Ukraine war, we believed the 2020s would bear similarities to the 1970s. What happened in the last years has obviously reinforced this conviction,” the analysis says. “These events begin with the sharp surge in inflation, combined with fledgling economic growth (stagflation) since 2021.”
Furthermore, the Amundi study highlights a couple of stagflationary triggers in common across the two periods, namely a regional war (Yom Kippur in the ‘70s) and the “lagged effect” of loose monetary and fiscal policies.
But the surface similarities mask some fundamental decadal differences that suggest the 2020s won’t track the 1970s too closely.
Most importantly, the Amundi paper says inflation 2020s-style appears to have peaked well below the ‘70s heights while central banks – albeit belatedly – are on the case with interest rate hikes.
Other demographic, monetary and economic factors also lower the odds of “a 2nd spike in inflation (similar to that of the end-1970s)” repeating in the 2020s.
“At the same time, for Central Banks, bringing inflation back to their targets may not require a deep recession,” the report says.
Nevertheless, investors may do well to reprise some 1970s asset favourites with value and cash likely to be back in fashion, set off with some modern accessories such as emerging market securities and green tech stocks.
Asset allocators must be prepared for a quick change of outfits, however, amid fast-moving trends.
“… investors will need an investment framework able to capture higher volatility in growth and inflation and adapt asset allocation decision on different regimes,” the Amundi paper says.
Decadism is not an exact science, of course, or even exactly a science, but the search for repeat patterns in 10-year blocks goes on.
Last year, for instance, US lifestyle rag, The List, noted pop music giga-star, Taylor Swift, has adopted a “largely ‘70s inspired” image.
“… think brown tones, retro collars, stripes, houndstooth and corduroy. And for her nighttime looks, Swift has embraced a disco vibe — think glitter, sequins and feathers,” The List rambles on.
Some tickets for the current Swift Australian tour are changing hands for over A$3,000, according The Guardian, compared to the official sticker price range of A$79.90 to A$379.90 in a phenomenon some economists suggest could even flow into inflation figures.
If the 1970s-2020s correlation holds, a punk revival must be next: think two pints of lager and a packet of crisps.