It’s Still Inflation to Me

Falling Prices in Tech & Appliances Signal Trouble for Stocks

Billy Joel’s 1980 hit It’s Still Rock and Roll to Me wasn’t just a catchy tune—it was a critique of fleeting trends and the illusion of change in the music industry. Joel calls out record executives for trying to push new styles as if they were something revolutionary, when in reality, “It doesn’t matter what they say in the papers, ‘cause it’s always been the same old scene.” He mocks the hype: “Hot funk, cool punk, even if it’s old junk, it’s still rock and roll to me.”

Four decades later, the same lesson applies to the current economic narrative. The financial media is celebrating “cooling inflation” as if it’s a victory, convincing investors that a soft landing is inevitable. But look past the headlines, and the fundamentals tell a different story: essential costs like food, rent, and energy are still rising, while discretionary items—appliances, computers, and AI-powered gadgets—are seeing steep price declines. This isn’t a healthy economy; it’s a warning sign that consumers are struggling.

And just like in 2000, 2008, and 2020, the stock market is partying like nothing’s wrong—right before the music stops.

The Inflation Illusion: Essential Costs Still Soaring

The latest data reveals a stark divide between what people need and what they can afford. Inflation isn’t truly falling—it’s shifting. While high-profile tech products and luxury goods are getting cheaper, necessities remain stubbornly expensive:

• Beef prices are up 8% year-over-year.

• Shelter costs continue climbing at nearly 5%, keeping homeownership and rent affordability at crisis levels.

• Overall food prices have risen another 4%, stretching household budgets even further.

Meanwhile, the biggest price declines are happening in categories where consumers can delay purchases:

• Technology products: down -8.6%

• Smartphones: down -13.7%

• Computers : down -10.7%

• Appliances: down -3.1%

• Major Appliances: down -4%

These aren’t normal price declines driven by technological advancement. They’re a flashing red signal that demand is drying up. Households that once splurged on the latest AI-powered gadgets are now prioritizing groceries and rent instead.

Market Reality: Lower Inflation Is Bad for Stocks at High Valuations

At face value, lower inflation might seem like good news. After all, if the Fed has successfully cooled price increases, that should mean lower interest rates and a better environment for stocks—right?

History says otherwise. Every major market top in the last 25 years—2000, 2008, 2020, and now 2025—has followed the same pattern:

1. Inflation rises, boosting corporate revenues as companies pass on higher costs. Stocks surge on the assumption that profits will keep climbing.

2. The Federal Reserve steps in, raising rates to slow inflation.

3. Inflation cools—but not because of healthy growth. Instead, it drops as consumer demand craters, particularly for discretionary goods.

4. Stock prices fall as earnings disappoint. Investors realize that companies can’t sustain their high valuations when organic demand is fading.

The NASDAQ’s historical trends confirm this cycle. Inflation spikes have coincided with stock market surges, while sharp disinflation has led to painful corrections. And yet, today’s stock valuations remain higher than during the dot-com bubble, with the S&P 500 trading at nearly 22x forward earnings—a level that assumes uninterrupted growth.