To The Moon

Hi, tigers 👋

Lately, markets have been dominated by headlines around the Middle East. Oil, natural gas, and shipping risks have all taken turns in the spotlight. But if we focus only on these “visible shocks,” we might miss a more subtle and potentially more important trend—the shadow of stagflation is quietly building.

Let me start with a question 👇

👉 Do you think the market today is closer to a “return of inflation,” or the early stage of stagflation?

This article is based on DBS’s latest macro weekly report, with additional interpretation.

1. Growth May Hold Up, But Inflation Is More Likely to Stick

When oil prices rise, many investors instinctively assume that growth will take a hit. But based on current data, the picture is more nuanced.

On one hand, the global economy entered this geopolitical shock with some underlying momentum. Trade and industrial production have remained relatively resilient, suggesting that demand is unlikely to collapse in the near term. Even if oil stays in the $100–110 range, the impact on growth is more likely to be a slowdown rather than a reversal.

On the other hand, inflation pressures are quietly building.

Consumers care less about year-over-year CPI and more about how much their cost of living has risen over time. Since the pandemic, prices in many economies have increased by 30%–40% cumulatively. This “price memory” makes households far more sensitive to further increases in energy and food.

👉 In short: growth may hold up, but inflation is more likely to get sticky.

2. The Real Shock Is Not Oil Itself, But Supply Chain Transmission

Oil and food prices are only the surface-level impact. The real story lies in how these costs ripple through the supply chain.

A more complete transmission chain looks like this 👇

👉 Higher energy prices → rising transport and manufacturing costs → margin pressure or price hikes → broader inflation

👉 Higher agricultural input costs → lagged increase in food prices → pressure on consumer spending

What matters for markets is how different sectors respond across this chain:

Upstream (direct beneficiaries):

• $Exxon Mobil(XOM)$ , $Chevron(CVX)$ (benefit from higher oil prices)

• Schlumberger, $Halliburton(HAL)$ (oil services demand improves)

Midstream (most exposed to cost pressure):

• Shipping: $ZIM Integrated Shipping Services Ltd.(ZIM)$ , $AP MOELLER - MAERSK A/S(0O77.UK)$

• Airlines: $Delta Air Lines(DAL)$ , $United Airlines(UAL)$

Downstream (dependent on pricing power):

• Consumer staples: $Procter & Gamble(PG)$ , $Coca-Cola(KO)$ (strong ability to pass on costs)

• Consumer discretionary: $Nike(NKE)$ , $Starbucks(SBUX)$ (more vulnerable to margin pressure)

👉 The key question is: who can pass on costs—and who cannot?

3. A Policy Dilemma: This Is Not Inflation That Rate Hikes Can Easily Fix

In this environment, central banks are facing a difficult balancing act.

This round of inflation is primarily supply-driven, not demand-driven. That means traditional tools like rate hikes have limited effectiveness:

• Raise rates → doesn’t fix supply constraints, but may hurt growth

• Hold rates → risks unanchoring inflation expectations

As a result, policymakers are leaning toward a more cautious approach:

👉 Neither rushing to stimulate nor aggressively tightening, but staying flexible amid uncertainty.

However, this creates another layer of risk:

👉 If markets have already priced in sustained rate hikes, but actual policy turns out to be more moderate, we could see a repricing in rates and asset markets.

Inflation vs Tech: A Market Split in the Making

This brings us to the most important question for investors right now 👇

👉 Should you position for inflation—or lean into tech?

Let’s break it down into different scenarios:

Scenario 1: Persistent Inflation (Stagflation-like environment)

In this case, markets tend to favor real assets and companies with stable cash flows:

• Energy: Exxon Mobil, Chevron

• Materials: $BHP Billiton(BHP)$ , $Rio Tinto PLC(RIO)$

• Industrials: $Caterpillar(CAT)$

👉 These companies benefit from pricing power and commodity exposure.

Scenario 2: Slowing Growth + Peak Rates (Soft landing)

If inflation gradually cools and interest rates peak:

• Growth stocks may regain valuation support

• AI and semiconductors remain key structural themes

Representative names include:

• $NVIDIA(NVDA)$ (core AI beneficiary)

• $Microsoft(MSFT)$ (cloud + AI ecosystem)

• $Apple(AAPL)$ (consumer tech leader)

• $Taiwan Semiconductor Manufacturing(TSM)$ (semiconductor manufacturing backbone)

👉 These names have strong long-term narratives but are sensitive to interest rates.

Scenario 3: Weak Growth + High Inflation (Stagflation risk)

This is the most challenging scenario:

• Tech valuations face pressure

• Cyclical sectors don’t necessarily outperform

• Market volatility increases significantly

👉 This helps explain why sector rotation has been so fast and inconsistent recently

How Should Investors Position?

In an environment like this, managing uncertainty is more important than making aggressive directional bets.

1️⃣ Avoid one-sided positioning—focus on balance

👉 Consider a mix of energy and growth exposure as a hedge

2️⃣ Prioritize companies with pricing power

👉 The ability to pass on costs is critical in an inflationary environment

3️⃣ Lower return expectations and embrace volatility

👉 Stagflationary environments tend to be choppy rather than trending

Final Thoughts – Three Questions for You 👇

1️⃣ If oil stays above $100 for more than six months, do you think the Fed will stick with higher rates or pivot toward a more accommodative stance?

2️⃣ Could this round of supply chain disruption evolve into a broader inflation problem?

3️⃣ In today’s environment, which strategy do you lean toward:

👉 Betting on inflation (energy, commodities)

👉 Or leaning into tech (growth stocks)?

Drop your thoughts in the comments

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