“Guns & Butter” May Be Back—and Inflation Could Be the Price

Janus Henderson /

03-04-2026

The featured report argues that the current U.S. mix of tax cuts, rising defence spending, and resilient labour markets increasingly resembles the inflationary “Guns & Butter” era of the 1960s.

Bernstein suggests today’s policy mix may prove more 1960s-style inflationary than a temporary 1970s oil shock, especially if fiscal stimulus lands into an already healthy labour market.
He argues that markets may be too comfortable with a backdrop of large tax cuts, expanding deficits, and accelerating military spending.
In that regime, Janus sees relative merit in shorter-duration assets, value, dividends, higher-quality fixed income, and gold over longer-duration growth exposures.

If the market is still positioned for the old regime, the full note is worth reading for what a more inflation-prone one could mean.

inflation