Current situation:
- U.S. inflation is currently 8.6%, which is the highest level in the past 40 years
- War in Eastern Europe continues, which leads to lower consumer sentiment, higher commodity prices (oil, food, etc.), and tighter financial conditions
- Tuesday, November 5th, 2024 is the next U.S. Presidential election
Lessons from the 1980s:
- On November 4, 1979, a group of Iranian students stormed the U.S. Embassy in Tehran, taking more than 60 American hostages that became known as the Iranian hostage crisis
- The constant media coverage of the Iranian hostage crisis in the U.S. served as a demoralizing backdrop for the 1980 presidential race. President Jimmy Carter’s failure to resolve the problem made him look like a weak and ineffectual leader and made it difficult for him to focus on his re-election efforts
- Ronald Reagan took advantage of this and won the election in a landslide.
- On January 21, 1981, just a few hours after Ronald Reagan delivered his inaugural address, the remaining hostages were released. They had been in captivity for 444 days.
How inflation will improve in 2025:
- Donald Trump will win the 2024 U.S. Presidential election and be inaugurated on January 20, 2025
- Within hours of Donald Trump's inauguration, Russia will stand down from their invasion in Ukraine. Peace & diplomacy in Eastern Europe will be in exchange for Russia being readmitted into the global economy & sanctions relief
- Commodity prices (oil & food) will decrease substantially and supply chain issues will improve now that Eastern European goods can flow freely throughout the world, which will lead to lower inflation in mid to late 2025
Parallels between the 1980s and 2025:
- Primary focal points (the Iranian hostage crisis & inflation from the war in Eastern Europe) are a priority by the American people will need to be solved
- The incumbent president (Jimmy Carter & Joe Biden) will try to solve their focal points, but will be unsuccessful in doing so. That's because their adversary (Iran & Russia) view the U.S. President as a weak & ineffectual leader
- The incumbent president failed to solve their focal point and the issue dominated headlines during their re-election campaign (1980 & 2024), which led them being defeated (Ronald Reagan & Donald Trump)
- Within hours of their inauguration (1981 & 2025), the primary focal points were solved as the Iranians released the hostages & the Russians ended their invasion.
Disclosure: I am not endorsing political side, but this is how I believe the war in Eastern Europe will end and translating to lower inflation in 2025
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