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Lessons Learned From The 1973-1975 Recession
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Headlines now scream “stagflation”… Lessons learned from the 1973-75 recession… Nixon’s New Economic Policy antagonized adversaries and allies… There will be bargains… Tariff wars heat up – and cool down… The Mailbag: tariffs and the Orange Man… |
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The stock market’s performance over the last week – at noon, the S&P 500 had dropped 12% since Wednesday – has rocked the economy, particularly given that the broad index had risen more than 20% in each of the last two years. Of course, it’s not the first time the market has fallen to this degree. To provide perspective on the market’s historical behavior, and to offer insights on what it means for equities, bonds, and the economy, Porter asked Distressed Investing senior analyst Marty Fridson to contribute to today’s Daily Journal.
Marty has seen it all… Investor’s Digest called him “the most well-known figure in the high-yield world.” Over a 25-year span with Wall Street firms including Salomon Brothers, Morgan Stanley, and Merrill Lynch, he became known for his innovative work in credit analysis and investment strategy.
Below, Marty describes the recession of 1973-1975, when high inflation, high unemployment, and slow economic growth merged to make stagflation a household word.
Here’s Marty…
One disconcerting aspect among many disconcerting aspects of the current market turbulence is the emergence of stagflation in economic commentary.
A mashup of “stagnation” and “inflation,” the term refers to a state of simultaneous low economic growth, high inflation, and high unemployment. JPMorgan CEO Jamie Dimon raised this possibility of it in his recent annual letter to shareholders:
The recent tariffs will likely increase inflation and are causing many to consider a greater probability of recession.”
As recently as May 28, 2024, the U.S. Chamber of Commerce headlined a report, “Stagflation Is Not A Looming Threat.” Yet on the morning of April 8, 2025, alone, the following headlines had all appeared within the last 24 hours:
“Trump’s Tariffs Leave Economists Fixated On One Word: Stagflation” (Bloomberg)
“Is The U.S. Economy Headed For Stagflation? Here’s What to Look For” (The Washington Post)
“America May Be Headed For This Rare Type Of Economic Crisis – Stagflation Explained” (Vox)
“Stagflation Is Now America’s Best-Case Scenario” (Bloomberg)