(Bloomberg) -- Quadratic Capital Management’s Nancy Davis is warning that higher prices and slower growth could result in a return of stagflation.

The “atrocious” University of Michigan consumer sentiment numbers on Friday were “a sign that the U.S. consumer is not as strong as people think,” Davis said in a Bloomberg Television interview. 

“We’re going to have an environment where we see higher prices, but not necessarily the growth that people are expecting,” said Davis, Quadratic’s founder and chief investment officer. 

While she said she didn’t “want to use the bad word of ‘stagflation,’” she noted that the last time the U.S. saw stagflation in the 1970s was due to the oil embargo. “Now it’s a different problem -- we’re not having oil prices shock the market, but we are having higher labor costs because it’s hard to get some workers in certain industries to come back” due to the pandemic, she said. 

Davis oversees the Quadratic Interest Rate Volatility and Inflation Hedge ETF (ticker IVOL), an active fixed-income product looking to profit from bond volatility and increasing inflation expectations. The fund has surged in popularity over the past year and boasts assets of more than $3.2 billion.

Read more: Stagflation Portfolio Luring Managers Who Say Time to Act Is Now

“Inflation is that thief in the night,” she said. Because of this, most investors want to own some type of inflation protection in their portfolios, “because we do live in a real world and if you don’t own inflation in your financial portfolio, you’re kind of shorted,” she said. 

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