With oil prices climbing and geopolitical tensions rising after the U.S./Israel–Iran conflict, some investors have begun comparing the current environment to 2022 — when Russia’s invasion of Ukraine triggered an energy crisis, fueled a wage-price spiral, and led to one of the most severe market downturns in decades.
But JPMorgan’s equity strategy team argues that today’s macroeconomic backdrop differs in several important ways from that period.
One of the biggest contrasts, they say, lies in wage dynamics. In 2022, wage growth accelerated rapidly as labor markets recovered from pandemic distortions, contributing to persistent inflation and prompting central banks to embark on an aggressive tightening cycle.
“This is not the case at present, where most wage data has been trending lower,” strategists led by Mislav Matejka said, noting that a wage-price stagflation spiral appears unlikely under current conditions.
Monetary policy positioning also stands in contrast to 2022. At that time, both the Federal Reserve and the European Central Bank (ECB) were maintaining policy rates well below neutral levels and still viewed inflation pressures as temporary.
Today, interest rates are closer to historical norms, and the yield curve has largely normalized after years of inversion. While markets have begun to price in potential rate hikes from the ECB and the Bank of England following the recent escalation, JPMorgan believes that “any early hikes would likely be viewed as a policy mistake.”
Consumer conditions have also shifted. In 2022, households benefited from strong pent-up demand and large pandemic-era savings buffers, which supported spending even as prices rose. Companies also enjoyed significant pricing power, enabling them to pass rising costs on to consumers.
Now, according to the strategists, “that might not be the case.”
Economic momentum also differs significantly from four years ago. At the start of 2022, growth in the eurozone was running above 4%, whereas it is currently closer to 1%. In addition, Europe’s energy system is better positioned today: LNG import capacity has roughly doubled since 2021, and several of the supply vulnerabilities that worsened the 2022 crisis — including low coal inventories and outages in French nuclear power — have largely been addressed.
JPMorgan also pointed to artificial intelligence as a factor that could shape the economic outlook. Concerns about AI’s impact on employment, combined with already fragile labor market sentiment, may push the economy toward deflationary pressures rather than stagflation. This represents “one of the crucial differences between a stagflation and a deflation narrative taking hold,” the strategists wrote.
Looking at equity markets, the team noted that European stocks have already declined around 11% even though the rise in gas prices so far is only about a quarter of the magnitude of the spike seen in 2022. That suggests markets may already be pricing in far more pessimism relative to the current energy shock than they did during the earlier crisis.