Capitalizing on Stagflation
A deep dive into stagflation and what it means for the financial market.
Stagflation, or recession-inflation, is an economic situation with high inflation, slowing gross domestic product (GDP) growth, and stubbornly high unemployment rates.
Even though the term “stagflation” remains an unconfirmed fear for investors as they try and draw parallels to the 1970s, that does not mean that opportunity does not exist. Rather, it is quite the opposite. A proper understanding of the intricacies of stagflation would indicate that gold, soft commodities, floating-rate bonds, short-term corporate bonds, and legacy non-agency RMBS remain the key asset classes that investors should seek to gain exposure to not only mitigate stagflation risk but to generate higher risk-adjusted returns as well.