Stagflation is coming and you need to be ready! It’s been 50 years since the stagflation of the 70s and there are a lot of misconceptions about what happens and how it affects stocks. Check out the stocks I’m buying no matter what in this FREE report! https://mystockmarketbasics.com/motleyfool
In this video, I’ll explain stagflation and what causes it. I’ll show you the warning signs of stagflation and why we could already be in danger of falling into a cycle that will destroy your finances. I’ll then show you how stagflation affects the economy, jobs and your finances before revealing the effect on stocks and the best stocks to buy during stagflation.
This could be one of the most important investing videos you watch in years. The stagflation of the 70s actually started in 1966 and lasted for 17 years. During that time, prices tripled and the stock market when nowhere. You need to be ready for it to happen again and know what to do with your investments.
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Stagflation is a period of higher inflation and stagnating economic growth. It’s really a combination of the two words, stagnation and inflation. Slowing economic growth means unemployment rises while inflation means savers are destroyed and stock returns are a thing of the past.
Stagflation is caused by a lot of interrelated factors but at its core is a weakening of faith in the dollar and government stimulus that inflates the money supply. That causes inflation to jump. Because of higher inflation, the Fed isn’t able to use stimulus to jumpstart the economy. Higher wages and lower spending means employers turn to layoffs which pushes the economy even lower.
How stagflation affects your personal finances is just as bad as what it does to your investments. The weakening economy means you could lose your job at the same time prices increase and the buying power of your savings is cut in half. Anyone living on a fixed income will see their livelihood drop with a lower value on their savings and income.
The affect of stagflation on investments isn’t what most people think. Bonds may actually outperform stocks because you can reinvest regular cash flows and maturities into higher yielding bonds. To do this, you want to invest in shorter maturity bonds.
Stocks didn’t do as well in the 1970s and they may not this time around either. Last time, stocks returned only what investors made in dividends. The Dow passed 1000 in 1966 and didn’t rise above that level until stagflation ended in 1982. Invest in strong companies with stable cash flows and a history of dividends you can reinvest at higher rates. Stocks to avoid in stagflation include growth and tech stocks because they depend on economic growth to justify valuations.
0:00 Stagflation Explained
1:40 What is Stagflation?
3:44 What causes stagflation and what are the warning signs?
7:48 How stagflation affects the economy and savings
9:19 How stagflation affects investments and the stock market
13:02 Best stocks to buy ahead of stagflation
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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