Is Stagflation on the Horizon?

Worse than a recession.

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There has been a lot of discussion recently about the possibility of that the world economy could slide into a state of “stagflation.”  But what is it and what investments might be best?

Slow Growth, High Unemployment & Rising Prices.

Stagflation is an economic phenomenon characterized by stagnant economic growth (stagnation) coupled with high inflation and high unemployment.  It’s a challenging situation for policymakers because the typical strategies to combat inflation, such as tightening monetary policy, can worsen unemployment, while measures to reduce unemployment, like increasing government spending, can exacerbate inflation. Stagflation was notably experienced in some Western countries, including the United States and the United Kingdom, during the 1970s, largely due to oil price shocks and other structural economic issues.

Stagflation was prevalent among seven major market economies from 1973 to 1982.

Stagflation is not a good reason to completely abandon a sound investment strategy. So, first of all, if it happens don’t panic and start selling stocks, bonds or totally change your business objectives.  Should it occur keep in  mind that it will end and a rebound is likely around the corner.

If you are inclined to take a defensive position then consider diversifying into precious metals, commodities or even real estate. There will still be a need for housing during an economic slowdown. Rental prices usually move with inflation and sometimes outpace it, even when the value of the dollar drops.

Bottom-line look for sectors that are more likely to be insulated against the effects of rising inflation and slowing economic growth.

Please keep in mind this information should not be considered as financial advice. Investment decisions should be based on individual research and consultation with a qualified financial professional. The value of investments can fluctuate, and past performance is not indicative of future results. Always consider your risk tolerance and financial goals before making investment decisions.


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About The Publisher

Jeff Corbett
As entrepreneur, author and magazine publisher with over 25 years’ experience in the global marketplace, I enjoy writing as an advocate for international business and personal freedoms. Thanks to my experiences building businesses I also have a tremendous interest in reading or writing about motivation and self-discipline.