Stagflation is one of those economic conditions that’s never a good sign, and it looks like we might be heading in that direction. For those who aren’t familiar, stagflation happens when inflation soars while growth slows to a crawl. The combination of high inflation, weak demand, and sluggish economic growth creates a perfect storm. The U.S. went through this in the 1970s when the oil crisis and poor monetary policy took a heavy toll. Now, as inflation keeps rising and growth continues to falter, it’s becoming painfully clear we might be walking down that same road again.
If you’re paying attention, the warning signs are everywhere. Look at the booming AI market for example. Nvidia’s market cap just hit $2 trillion, and AI investment is at record levels. But here’s the catch—the revenue growth is slowing. It’s starting to look a lot like the dot-com bubble of the late ’90s. In fact, technology stocks, especially those in the S&P 500 Information Technology sector, are starting to show cracks. This sector has dropped 11% since December, officially entering a correction. And over the past two years, we’ve seen three different drawdowns of at least 10%. The Magnificent 7, the group of tech stocks driving most of the market’s growth, have lost a staggering $2.4 trillion in market cap just in the past three months.
On Monday alone, the group lost $567.5 billion, with Nvidia accounting for half of that loss. The company’s shares have fallen 24% since January. It’s not just a minor correction—this is a massive shake-up. While the big tech sell-off might seem like an overreaction to some, the truth is that the market is showing signs of stress, and it’s hard to ignore the parallels to what happened in the dot-com crash.
The consumer side of the economy doesn’t look much better either. According to recent reports, fewer Americans are planning vacations, and that’s not just a small dip. It’s the lowest since the 2020 crisis. With consumer spending making up about 68% of GDP, this decline is a serious red flag. If people aren’t spending, growth is going to stall, and that impacts the economy in ways we can’t fully predict just yet.
But here’s the kicker: about 40 million Americans are underemployed, meaning they’re working less than they want or not earning enough to make ends meet. If you factor in those who earn less than $25,000 a year, the true unemployment rate sits around 24%. That’s a staggering number, and it reveals just how dire things have become. When people can’t make ends meet, they stop spending, and that’s when things get really dangerous.
And don’t think it’s just a matter of slowing consumer spending. More and more Americans are missing debt payments, especially on credit cards. The serious delinquency rates have surged to 11.4%, the highest in 13 years. This is happening at a pace we saw during the Great Recession of 2007-2009. It’s clear that consumers are feeling the strain—and when consumers tighten their belts, the ripple effects throughout the economy are massive.
The goods trade deficit is another flashing warning light. It widened by 25.6% to a record $153.3 billion in January. Imports surged by nearly 12%, while exports only rose 2%. This gap shows that we’re importing more than we’re exporting, and it’s a sign that American businesses are trying to secure shipments to avoid tariffs. This trade war isn’t something that can be ignored anymore—it’s happening, and it’s hurting businesses across the country.
To top it all off, the IRS is reporting that refunds are 32% lower than last year. With all these issues stacking up, the market is likely to get frustrated. How can any company plan for the future when tariffs change month to month? It’s not just chaotic—it’s downright dangerous for long-term business stability. We need clarity on trade, and fast, or things are going to get much worse.
Sources:
https://x.com/leadlagreport/status/1897331448379531425
https://x.com/GlobalMktObserv/status/1897334071891767520
https://x.com/GlobalMktObserv/status/1897301456849658071
https://x.com/KobeissiLetter/status/1897319279105650963
https://www.cnbc.com/2025/02/25/average-irs-tax-refund.html