USA STAGFLATION OR COMPRESSION? GDP Collapse to 1.4% and Truth About the '70s Panic.

Igor Pereira · Friday at 17:28

The United States has today released the most dangerous GDP report in recent years, and the retail market is booming.

On the one hand, we have economic growth falling apart. On the other, inflation is rekindling. Immediately, commentators began shouting "Stagflation" and drawing parallels with the crisis of the 1970s. But the lens of Smart Money Sees a different scenario.

By Igor Pereira Financial Market Analyst

Below, we dissected the Fed trap and explained why, despite the scary numbers, we are in a phase of systemic compression, not in an imminent collapse.

The mathematics of today's report is brutal and shows that the economy is failing to sustain traction.

The GDP collapse: Fourth quarter GDP (Q4) came in only 1.4%. The expectation of the market was a robust growth of 3%. This represents a gigantic decline in relation to the 44% recorded in the third quarter (Q3).
The Fragile Labour Market: You can't run the biggest economy in the world generating just about 15,000 jobs per month, which was the average of 2025.
The Inflation Knife (PCE): What makes this terrifying for Wall Street is that the favorite Fed inflation indicator (PCE) came warmer than expected. The annual PCE crashed 2.9% (against 2.8% forecast) and monthly prices jumped 0.4% (against consensus of 0.3%). The core of the PCE (Core) repeated the movement and also met expectations.

With the economy slowing down and prices rising simultaneously, the Fed is completely trapped.

If they cut the fees to save GDP of 1.4%, inflation (which is already accelerating) explodes upwards.
If they maintain rates high to kill inflation, the economy will continue to break inside.
There's no clean exit.

Despite the cries of stagflation, the cold analysis of our institutional algorithms requires calmness.

The Myth of Volcker: The fact that GDP slowed down and the PCE rose does not automatically mean that we are returning to the stagflation of the 1970s, where 20% rates were needed.
The ERM Index: Watching the Index Market Terrain Composite (MTC), the current reading is stuck in 65.
Reading: According to the parameters of the graph, the 50-65 zone indicates a Compression Phase (Compression Phase), far from the peak of "Sistemic Risk" seen in 2025, when the ERM hit 100. We're in a moment of compression, not acute crisis.

The next few weeks will be vital for defining the global flow of capital.

My Vision: While the media spread the panic of the stagflation, the Smart Money sees only a liquidity compression that will force the Fed to choose between saving the Dollar or saving growth.

Gold (XAU/USD): It's the perfect asset for this phase. If the Fed keeps the rates, the economy breaks down and capital runs to the metal. If the Fed cuts, inflation destroys the Dollar, and Gold puts a price on that devaluation.
Positioning: Don't operate in despair. Let the GDP data dust settle and wait for the retest of our grey areas of institutional accumulation.