Inflation Is Underestimated, but That Might Be a Tailwind for Markets

Economists and finance pros have been discussing the 1970s a lot recently, wrangling over whether the Iran war will stoke a new era of inflation. For one market research firm, the answer is yes, and most economists are underestimating how bad it could get.

Strategists at Bravos Research shared their outlook in a thread on X, noting that they see inflationary trends mirroring those of the 1970s. However, while they disagree with the popular consensus that inflation will quickly cool once the Middle East conflict winds down, they also see a profitable opportunity for patient investors.

“We do think that we are following the footsteps of the 1970s, as commodities are once again accelerating higher,” Bravos said. “And this has led to a structural shortage of crops that is going to lead to the closing of the gap between agricultural commodities and gold.”

The firm said that gold tends to serve as a benchmark for pricing across the broader economy, adding that a significant gold price rally preceded the 1972 inflation shock and that the precious metal hasn’t seen this type of momentum since.

Gold prices have enjoyed a historic rally since early 2025, driven by economic and geopolitical forces.

While it noted that inflation would be higher, the firm also highlighted that, throughout recent history, many periods of high inflation have been followed by stock market dips.

The Bravos strategists expect a stagflation-like scenario to transpire, in which inflation is pushed up to 4% to 5% by rising commodity prices, raising costs for businesses and consumers and weighing on the stock market.

While that may seem bleak, Bravos also said that these conditions will ultimately likely help spark a new market recovery.

“Over the long run, stocks are priced in US dollars, and as the dollar loses purchasing power, asset prices naturally adjust higher,” the firm wrote. “That’s why markets eventually tend to recover and push to new highs despite periodic drawdowns”

This points to an opportunity for those who can ride out market volatility and wait for the type of recovery that Bravos expects.

“Even if markets dip in the near term due to inflation, those periods often become strong entry points for long-term investors.”