BlackRock and Charles Schwab are signaling that the U.S. economy may be entering a period of unpredictable, “rolling” inflation—one that could coincide with the unusual prospect of a full-employment recession.
Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, warns that inflation pressures are unlikely to settle into a smooth, predictable path anytime soon. Instead, she foresees an ongoing cycle of ups and downs, driven in part by the lingering and uneven effects of tariffs introduced under former President Donald Trump.
While tariffs have long been flagged by economists as potentially inflationary, the actual impact on consumer prices has so far been muted. Members of Trump’s administration maintained that any inflationary effect would be a “one-time” price bump, as companies adjusted their supply chains and sourcing strategies. However, Sonders disputes that view, citing the erratic and politically driven nature of tariff implementation in recent years.
“The problem is, there is no ‘one time’ when it comes to tariffs,” Sonders told Bloomberg. “Their application has been inconsistent—sometimes imposed, sometimes delayed, and often leveraged as a geopolitical or economic tool beyond trade balances or revenue generation. This creates a rolling, ongoing effect.”
For Sonders, the pattern mirrors what she has previously described as a “rolling recession,” where economic weakness does not strike all sectors simultaneously. Instead, pockets of the economy contract at different times, creating a staggered slowdown. That same stop-and-start rhythm, she argues, is now showing up in inflation data.
“We’re seeing inflation behave in a similar way,” she explained. “Certain areas experience sharp price increases due to tariffs or supply disruptions, while other areas see temporary relief. These offsetting movements keep overall inflation from moving in one clear direction, but they also prevent it from truly settling.”
For wealth advisors and RIAs, this environment presents a distinct challenge: traditional inflation forecasting models may fail to capture the volatility of rolling, sector-specific price swings. Portfolios heavily exposed to industries directly affected by tariffs—such as manufacturing, agriculture, and consumer goods—may face sudden input cost spikes. Meanwhile, other areas may enjoy temporary disinflation, only to reverse later.
This patchwork pattern complicates both asset allocation and client communication. Advisors will need to monitor not just headline inflation data but also sector-level trends, input cost structures, and global trade developments. Fixed-income positioning, for instance, may require greater flexibility, as sudden inflation bursts could erode returns on longer-duration bonds, while deflationary pockets might temporarily favor them.
In addition, a “full-employment recession”—where joblessness remains low but growth stalls—could further muddy the waters for policy responses. The Federal Reserve may find itself reluctant to cut rates in the face of persistent inflation pockets, even if GDP growth slows.
For clients, this means inflation management is less about a single defensive move and more about an adaptive, ongoing process. In a rolling inflation landscape, the winners will likely be those who can pivot strategies quickly and identify sector-level opportunities ahead of the crowd.
