Chris’ note: Last year was all about record inflation. The rest of this year will all be about stagflation – a combination of stalling growth and stubborn inflation.

The last time we had this kind of economy was in the 1970s. And master market timer Mason Sexton remembers it well. He got his start on Wall Street in 1972. And he remembers vividly how it destroyed investor wealth.

Most folks don’t know it yet. But the paradigm of the last 30 years is changing. And Mason says only those who understand the new paradigm will make it through the next decade with their wealth intact.

He’ll be revealing how to navigate this new paradigm in a presentation that airs at 10 a.m. ET next Tuesday, May 23, in a landmark event he calls The Prophecy.

So make sure to RSVP for that with one click here. Then read on below for more from Mason on why the next decade will be very different from the decade we’ve just been through.

One day, two young fish are swimming along…

They meet an older fish heading in the opposite direction. As the older fish approaches, he says, “Morning, boys. How’s the water?”

The two young fish swim on. Eventually, one turns to the other, puzzled, and asks, “What’s water?”

It’s an interesting insight: Important realities are often the ones that are hardest to see and talk about.

But what does this mean for us as investors?

Paradigm Shift

The American Heritage Dictionary defines a paradigm as …

A set of assumptions, concepts, values, and practices that constitutes a way of viewing reality for the community that shares them, especially in an intellectual discipline.

Put simply, a paradigm is the set of rules that govern our perception of reality. It’s a framework for understanding the universe.

It’s “common knowledge”… the things that everybody knows that everybody knows.

But paradigms can be tricky things…

When they stick around long enough, we imagine them to be permanent. We can’t imagine any other way. Like the two young fish, we are swimming through water we don’t even know is there.

And that can be a problem.

Because − despite what we may want to believe − paradigms change. Our worldview is thrown off-kilter. Everything we believe, everything we think we know, is proven wrong.

It’s my firm belief that such a paradigm shift is coming for markets. In fact, it’s already here.

The Way Things Are

How would we define the investing paradigm of the last several decades?

At a high level, it consisted of three basic assumptions…

  1. Low inflation and the expectation of low inflation

  2. Easily available credit and the continued expansion of credit

  3. The belief that central banks could always save us

From 1994 until 2020, inflation stayed under control. Over that time, the average annual inflation rate was low. In fact, until last year, the Fed’s main concern with inflation was that it was too low.

The second assumption also held true. Apart from financial panics like we experienced in 2008, credit has been readily available.

Ultra-low rates guaranteed it. This gave rise to high-tech startups that took the world by storm and made fortunes in the process.

As for the third assumption…

In the wake of the global financial crisis, central banks cut rates to zero and left them there for years. And they didn’t stop there.

The Fed and other central banks bought trillions of dollars of government bonds in return for newly minted cash – aka quantitative easing or QE.

The message from central banks to investors was clear: We’ve got your back.

Taken together, I would loosely define these basic assumptions as the investing paradigm we have all been living through for the past three decades. This is our “water.”

Now, the paradigm is shifting. It’s all coming to an end.

Out With the Old, In With the New

Last year, the return of inflation shattered this paradigm.

And although the Fed believes it can conquer inflation by raising rates, this will be a prolonged battled that stretches on for years.

I began my career on Wall Steet in the 1970s. I worked for JPMorgan Chase, Salomon Brothers, and Mitchell Hutchins before setting up my own research shop.

The most important thing for investors to recognize is that once inflation takes hold of the overall psyche of the market, it’s very hard to get rid of it. It’s very hard to change it. Inflationary psychology is the culprit. And slaying that culprit is a Herculean task.

And it won’t be an inflationary boom that’s coming… but a stagflation like we had in the 1970s. That’s a vicious combination of stubbornly high inflation and falling economic growth.

One sign of this is tightening credit conditions. The St. Louis Fed tracks the net percentage of banks that are tightening lending standards and making it harder to take out a loan.


That’s a huge problem for an economy that runs on bank credit.

But what about the Fed? Part of the paradigm of the past three decades or so is that it will always pull a miracle. Won’t it be able to do the same this time?

I doubt it.

The Fed is between a rock and a hard place. On one side is inflation. On the other is a looming recession.

The Fed’s usual move of cutting rates to stave off a recession risks letting inflation fly again.

The old paradigm is dead. Folks who don’t understand this this will be woefully unprepared for what comes next. Many will be utterly wiped out.

But there is a way to prepare for − and profit from − this changing world order.

New Paradigm Research

As I mentioned, I got my start on Wall Street in the 1970s.

I’ve seen what a stagflationary paradigm can do to a portfolio.

From April 1971 to April 1982, the return from the Dow was negative 62% after factoring for inflation. Buy-and-hold investors were destroyed.

You can imagine what that did to people’s psyche. But that doesn’t mean there weren’t profit opportunities.

For instance, in August of 1987, I predicted the stock market top – to the day – that came before the “Black Monday” crash.

It took the Dow down more than 22% in a single day. That’s the worst one-day loss, in percentage terms, in history.

But one client who followed my research later told me that her traders were able to turn $100,000 into $13 million by following my predictions.

I believe we’re heading back to that world. We’re entering a “new paradigm.” And in this new world, we will have to invest differently than we have these past thirty years.

But it’s still possible to profit. For instance, on April 5, I sent the following alert to my clients about Tesla (TSLA):

Now short TSLA from $202 with [stop loss] at $208 and objective of $142-$154.

When you short a stock, you profit when its price falls. And after that alert, Tesla fell 17% in three weeks and hit $154. Buy-and-hold investors were likely caught off guard by such a dramatic fall. But my clients had the chance to profit.

And I would like to show you how I did it.

I invite you to join me on Tuesday, May 23, at 10 a.m. ET. I’ll reveal my latest prediction for this new paradigm. And I’ll share what you can to prepare.

You can automatically reserve your spot here and find more details of the past market calls I’ve made.

I hope to see you there.


Mason Sexton
Editor, New Paradigm Research