Episode 1273: When Lower Inflation Hurts

Today's Post - https://bahnsen.co/4tNvJGE

David Bahnsen opens Dividend Cafe after a volatile week marked by a weaker-than-expected GDP report and a Supreme Court ruling striking down President Trump’s tariff rationale under the Economic Emergency Act (with a deeper tariff discussion coming Monday). His core thesis: disinflation is likely in 2026—and it may not feel positive.

He clarifies the difference between inflation (rising prices), disinflation (slower price increases), and deflation (falling prices). Bond markets are signaling softer expectations, with the 10-year Treasury near 4.07% and five-year inflation breakevens around 2.4%, suggesting modest real growth ahead.

Recent GDP registered about 1.4% annualized, distorted in part by a government shutdown, while core PCE inflation is roughly 3% year-over-year versus 2.9% a year ago. Bahnsen expects services-driven disinflation, particularly as rent measures catch up to real-time data. However, that may not improve affordability given tight housing inventory and a frozen resale market.

He also warns that business investment is overly concentrated in AI and data centers—echoing the fracking-era CapEx surge—while broader investment remains subdued. Risks to growth include a weak labor market with low hiring, a personal saving rate near 3.4% (raising the chance tax refunds rebuild savings instead of fuel spending), and muted bank lending despite lower rates.

00:00 A wild news week

01:48 Cutting through economic spin

03:23 Why 2026 disinflation may disappoint

04:36 Bond market signals

07:16 GDP and data distortions

10:49 Services-led disinflation

14:05 Concentrated CapEx risk

16:38 Labor, savings, and lending

20:09 Tariffs and demand drag

22:24 What to watch next

Links mentioned in this episode: DividendCafe.com

TheBahnsenGroup.com