The Specter of Stagflation: Noise or Near-Term Risk? 

Published August 29, 2025 –  By Paul Beland, Global Head of Research – Wealth Management 

U.S. inflation remains stubborn. Growth is cooling. Employment is wobbling. And financial advisors are navigating a uniquely complex macroeconomic environment, one where the term stagflation has re-emerged with serious implications. 

While the dreaded trifecta of high inflation, weak growth, and high unemployment hasn’t fully materialized, warning signs are building. From Jerome Powell’s recent Jackson Hole tone shift to tariff-fueled inflation risks and political pressure on the Federal Reserve, CFRA’s latest macro research outlines critical developments that wealth managers must watch closely. 

In this blog, we’ll explore several key macro signals—from weakening job trends to international equity implications and why advisors should brace for elevated volatility across asset classes. 

Inflation Is Cooling But Still Sticky 

Despite the post-COVID monetary tightening cycle, inflation remains above the Federal Reserve’s 2% target. Core PCE inflation has trended downward but remains elevated due to fiscal stimulus, tariff pressures, and lingering supply chain distortions. 

While advisors may have hoped for a textbook soft landing, inflation’s downward path has stalled. With new tariffs potentially adding 3% to consumer goods and up to 10% to investment goods in near-term price pressures, the inflation puzzle has become more complex. 

Growth Slowing, But Not Collapsing 

U.S. real GDP growth is expected to hover around 1.8% in 2025 and 2.0% in 2026–2027, according to CFRA forecasts. This moderate but stable growth outlook suggests we are not yet in stagflation territory but uncertainty abounds. 

Consumer sentiment has deteriorated, small business investment has slowed, and large corporations remain cautious amid trade policy headwinds. Wealth advisors should monitor the rising probability of job losses – a key indicator that could quickly tip the balance. 

Why Jerome Powell’s Jackson Remarks Matter 

Fed Chair Powell’s recent statements signaled a potential September rate cut, prompting speculation about a pivot. But this pivot isn’t necessarily driven by market-friendly optimism. 

Instead, the Fed faces a policy conundrum: cooling employment data is pushing against sticky inflation. With weekly jobless claims rising and non-farm payroll growth slowing to 85K/month in 2025 (vs. 168K in 2024), the Fed is being forced to rebalance its dual mandate—without sacrificing inflation control. 

Moreover, Powell’s comments come amid growing political scrutiny of the Fed’s independence, threatening credibility and potentially weakening the U.S. dollar. 

Download the full report to see CFRA’s forecast for the Fed Funds rate and interest rate policy path » 

The Job Market Has Peaked 

Unemployment remains low at 4.2%, but the trend is turning. Continuing unemployment claims are climbing. And the pace of job creation is decelerating sharply: 

• 2023 monthly avg. job gains: 251,000 
• 2024 monthly avg.: 168,000 
• 2025 YTD avg.: 85,000 

That’s a clear slowdown, one that hasn’t triggered a full recession signal yet but represents a cooling labor market with downside risk.

What It Means for Financial Advisors 

For financial advisors, this cooling trend means greater scrutiny on: 

1. Portfolio diversification across sectors and regions 
2. Fixed income positioning as yields remain elevated 
3. Equity valuation pressures and margin contraction 

CFRA’s full report highlights tactical shifts advisors may consider including lowering bond exposure and increasing international equities. 

The Inflation Trade: Not Quite Over 

The Tariff Effect 

CFRA’s macro research estimates that if a 30% tariff is passed through to finished goods: 

• Investment goods prices could rise ~10% 
• Consumer goods prices could rise ~3% 

But advisors shouldn’t panic just yet—many consumer-facing companies are absorbing the cost rather than passing it to buyers. Still, tariffs are a source of one-time inflation bumps, which add complexity to the Fed’s decision-making calculus.

What Clients May Be Asking You 

Your clients are reading headlines about inflation, dollar volatility, and rate cuts. They may be asking: 

• “Should we stay in cash or reinvest?” 
• “Is now the time to move internationally?” 
• “Will interest rates drop soon?” 

What’s Next for the U.S. Dollar? 

One of the lesser-discussed risks in financial media right now is the pressure on the U.S. dollar from both monetary and political fronts. 

• The U.S. Dollar Index (DXY) is down nearly 10% year-to-date. 
• Long-term interest rates remain volatile amid inflation risks. 
• Political challenges to Federal Reserve independence could weaken global confidence in the dollar’s reserve currency status. 

For global allocators, this opens opportunities in European and APAC equities where valuations are more attractive and central bank policies are more supportive. 

CFRA’s Macro Allocation Guidance for 2025–2026 

CFRA has made several allocation adjustments based on the evolving macro landscape: 

This reflects a preference for equities (especially outside the U.S.), shorter-duration fixed income, and maintaining liquidity. 

Access full portfolio construction insights in the complete CFRA macro report » 

Key Takeaways for Financial Advisors 

• Inflation is still elevated, and new tariffs could keep it sticky through 2026. 
• Growth is slowing, but recession is not base-case. 
• The Fed is likely to cut rates soon, but not aggressively. 
• Dollar weakness and Fed independence risks are underappreciated. 
• Rebalancing portfolios with more global equity exposure may be prudent. 

Read the Full Macro Report: Asset Allocation, Forecasts & More 

CFRA’s Stagflationary Impulses report is a must-read for financial advisors aiming to stay ahead of macro forces driving market volatility. The report provides: 

• Updated U.S. growth and inflation forecasts 
• Tactical asset allocation guidance 
• Fed policy outlook and interest rate forecast 
• Global equity opportunities 
• Strategic implications for portfolio positioning 

Download the full report here to get expert-level insights, charts, and actionable recommendations for 2025 and beyond. 

2025 Bank Stress Tests Reveal Resilience and Opportunity for Regional Banks 

Published July 17, 2025 – By Alexander Yokum, Senior Vice President, Equity Research

All 22 Banks Passed But Not All Wins Were Equal 

The Federal Reserve’s 2025 stress test results are out, and the verdict is clear: every regional bank tested passed, showcasing the industry’s resilience even under simulated economic downturns. But while all institutions cleared the bar, a few emerged as leaders in capital strength, risk management, and return potential. 

Our latest thematic research report breaks down why some banks, including M&T Bank (MTB) and Wells Fargo (WFC), are now in a stronger position to return capital and drive shareholder value heading into 2026. 

Less Severe Stress, Stronger Results 

This year’s scenario was notably milder than in 2024: 

1. Real GDP contraction eased from -8.5% to -7.8%
2. Housing prices fell 33% vs. 36% a year ago
3. Aggregate capital drawdowns improved, with CET1 ratios declining just 180 bps (down from 280 bps in 2024) 

These shifts led to reduced capital requirements and a renewed focus on share buybacks and dividend growth across the industry. 

What’s Ahead for Regional Banks? 

Our research also explores proposed changes to the Fed’s stress test process, which could create more predictable capital planning, reduce volatility in regulatory requirements, and support higher long-term ROEs. 

Yet the key question remains: Which banks are best positioned to benefit?

What Popped and What Flopped: Regional Bank Q2 Recap

After regional banks successfully navigated the 2025 stress tests, attention turned to their quarterly performance. In this video, CFRA equity research analyst Alexander Yokum analyzes Q2 2025 regional banking earnings that delivered impressive growth—marking a significant recovery after years of declining profits due to the Silicon Valley Bank crisis and commercial real estate challenges. Yokum examines the key drivers behind this turnaround, including improved credit quality and steady net interest income gains, while also discussing persistent challenges like deposit outflows and intense competition for deposits. With regional banks holding strong capital positions and merger activity increasing, Yokum identifies his top investment picks and explains why the sector appears well-positioned for sustained growth through the remainder of 2025.

AI Agents and Lower Costs Are Fueling a Computing Boom

Published July 10, 2025 –  By Angelo Zino, Senior Vice President, Technology Equity Analyst

Data center spending is on track to surpass $1 trillion by 2028. Are you positioned for the AI infrastructure surge? 

With the rise of advanced reasoning models and AI agents, the computing economy is entering a phase of exponential growth. What was once driven by a handful of hyperscalers is now expanding to include a broader mix of enterprise, sovereign, and emerging infrastructure builders. This thematic shift has significant implications for investors, cloud providers, and semiconductor leaders alike. 

The Compute Revolution Is Just Beginning 

1. AI Agents Are Driving Demand into Overdrive: Agentic AI models, designed for reasoning, decision-making, and autonomy, require far more computing power than traditional GenAI. Some models now need 100x to 1,000x for the processing power of legacy workloads.
2. Total Cost of Ownership Is Falling Fast: NVIDIA’s architectural leap from Hopper to Blackwell is driving 85%+ efficiency gains. With Rubin and Rubin Ultra on the horizon, computing infrastructure costs are dropping sharply while opening the floodgates for expanded AI adoption.
3. From Big Four to Many: While Amazon, Microsoft, Alphabet, and Meta will remain central, new players like Tesla, Apple, CoreWeave, and sovereign governments are building their own AI infrastructure, unlocking the next wave of capex acceleration.
4. Compute Demand = Digital Oil: As costs drop and use cases explode, computing becomes the next indispensable resource. Like mobile data in the smartphone era, AI demand is poised to soar—even as costs decline. 

Get the Full Picture – Download CFRA’s Full Thematic 

Is the Economy Cracking Beneath the Surface? What Financial Advisors Must Watch in 2025. 

Published July 1, 2025 –  By Paul Beland, Global Head of Research – Wealth Management 

 The U.S. economy may still be standing but the foundation is showing signs of stress. 

From rising delinquencies to weakening job creation, CFRA’s latest thematic research uncovers some uncomfortable truths that financial advisors can’t afford to ignore heading into 2026. While headline numbers like the 4.2% unemployment rate suggest stability, the underlying data tells a more fragile story. 

• Job growth has dropped to just 124,000 per month in 2025—down 50% from 2023 averages.
• Retail sales fell -0.9% month-over-month in May—consumer momentum is fading fast.
• Credit card delinquencies now exceed 12%, and student loan delinquency is at a record 31%. 

So why is the market still climbing? 

Valuations are stretched. The S&P 500’s P/E ratio is at 22x forward earnings, a nearly 20% premium to its 10-year average. Meanwhile, consensus EPS growth for 2026 has already been cut in half — down to 6.8% from 13.7% just six months ago.

What Moody’s U.S. Credit Downgrade Means for Wealth Managers in 2025 

Published May 20, 2025 –  By Paul Beland, Global Head of Research – Wealth Management 

On May 16, 2025, Moody’s officially downgraded the U.S. credit rating from Aaa to Aa1, marking a significant shift in the perception of U.S. fiscal stability. While not the first downgrade, S&P acted in 2011 and Fitch followed in 2023, Moody’s move carries weight. It underscores growing skepticism around the U.S. government’s ability to manage its long-term debt obligations and avoid fiscal deterioration. 

For wealth managers, this downgrade isn’t just a headline it’s a signal to reevaluate fixed income strategies, Treasury exposure, and currency risk. CFRA’s new report, Concerning Fiscal Outlook, dissects the market impact of the downgrade and offers practical guidance for advisors navigating this evolving macroeconomic environment. 

Surging U.S. Debt and the “Treasury Tsunami” of 2025 

The downgrade comes as the national debt surpasses $36 trillion, with annual deficits still exceeding $2 trillion. More troubling is the concentration of debt coming due: over $9 trillion in Treasuries will mature in 2025, creating what CFRA refers to as a “Treasury Tsunami.” 

This massive refinancing wave could destabilize the bond market, particularly if demand for new debt issuance weakens or interest rates rise further. The Treasury will likely issue more than $10 trillion in new bonds this year, a level of supply that could overwhelm even the most liquid fixed income markets. 

“We expect this dynamic to continue to drive volatility in the Treasury market and put upward pressure on yields.”
– Paul Beland, CFA, CFRA Global Head of Research 

Longer-dated maturities are especially vulnerable to these pressures. That’s why CFRA recommends advisors consider shifting toward intermediate-term Treasuries (3-, 5-, and 7-year notes), which offer lower duration risk and more attractive reinvestment flexibility in a rising rate environment. 

Debt Monetization and the Federal Reserve’s Shifting Role 

As deficits swell, attention is turning back to the Federal Reserve—not just as a lender of last resort, but as a potential buyer of last resort. The Fed began monetizing debt during the 2008 financial crisis and expanded those efforts in 2020. While the central bank is currently in a quantitative tightening phase, CFRA believes this may reverse if bond market dysfunction or recession risk escalates. 

Potential triggers for renewed debt monetization include: 

1. Treasury auction failures or declining foreign participation 
2. A sharp economic slowdown requiring accommodative policy 
3. Inflation shocks from tariffs or supply-side disruptions 

“Debt monetization isn’t theoretical—it’s a tool the Fed has used before and may need again.”
– Paul Beland, CFA, CFRA Global Head of Research 

Such policy shifts could reintroduce inflationary pressure and weaken the U.S. dollar. Advisors should remain alert to Fed commentary, especially regarding balance sheet expansion, which could send clear signals about future yield curve movements. 

U.S. Dollar Stability and the Global De-Dollarization Trend

Despite its continued role as the world’s dominant reserve currency, the U.S. dollar is showing signs of slippage. The dollar’s share of global reserves has declined to 57.8%, down from over 70% in 2001. Meanwhile, the U.S. Dollar Index (DXY) is down nearly 10% year-to-date, decoupling from its historical relationship with rising Treasury yields. 

This divergence reflects growing concerns about the U.S.’s fiscal position and the global appetite to diversify away from dollar-denominated assets. Though no immediate competitor exists, the euro and yuan each carry their own structural weaknesses. The long-term trend of de-dollarization is gaining slow but steady momentum. 

Wealth managers should monitor this shift closely, as further erosion in dollar demand could: 

• Reduce the U.S.’s ability to borrow cheaply 
• Increase currency volatility 
• Alter capital flow dynamics across global markets 

CFRA’s report dives deeper into these currency risks and provides scenarios to help advisors prepare client portfolios for shifts in global reserve behaviors. 

Prepare for What’s Next with CFRA Macro Research

In today’s volatile policy and credit environment, wealth managers need more than headlines, they need actionable insights backed by rigorous macroeconomic analysis. CFRA’s Concerning Fiscal Outlook report provides a deeper look at the implications of Moody’s downgrade, surging Treasury issuance, and the evolving role of the Fed. 

 Download the full report – “Concerning Fiscal Outlook” 
→ Get strategic allocation insights and macro guidance to help protect client portfolios through the remainder of 2025.