What is stagflation?
Stagflation is more than just a nasty dose of inflation. It’s also paired with a stagnant economy – hence the name.
So what does that mean?
The cost of buying goods, driving your car and heating your home is going up.
Whilst the economy is getting weaker, unemployment is rising and the cash in your wallet is worth less and less.
How dangerous is stagflation for investors?
When stagflation bites, intangible assets like crypto, tech stocks and other risky plays can be wiped off the board.
This is because when investors aren’t keen to take risks, they tend not to buy these assets.
As a result, many investors panic and cash out. But hoarding cash is an expensive way to try to time the market when cash is all but guaranteed to lose purchasing power.
But, it’s not all bad…
Even amongst the chaos, there are opportunities for investors…
And you could tap into them to help protect your wealth from clutches of stagflation.
How can investors protect their wealth?
When stocks are dropping like flies and the headlines are full of panic, it can be tempting to cut and run.
But before you do…
Think about this famous quote from Baron Rothschild, who built his fortune during the crisis that followed the Battle of Waterloo:
“Buy when there’s blood on the streets.”
When stagflation rolls into town, there will be bloodshed.
But I wouldn’t try to time the market or predict what the Federal Reserve (a.k.a. the Fed – the US central bank) will do next – even they don’t know.
Instead, I’d recommend you batten down the hatches and follow these three simple steps to weather the stagflation storm.
How can investors beat stagflation?
1. Stick to the basics
No matter how high inflation gets, people will still need essentials like food, energy and transport.Warren Buffett has famously hedged his bets on railway stocks. That’s because he understands that no matter which way the market swings, goods and people will need trains to take them up and down the country.
2. Preserve your wealth with recession-proof stocks
Avoid get-rich-quick schemes and risky companies with exciting new ideas.Instead stick to old faithful stocks with lots of experience, steady profit margins and decent dividend payouts.
3. Go for gold
When you look back at the 2008 crisis, the beginning of the end started with gold.Three months before any other assets began to recover, the yellow metal price began to rocket.Gold and other precious metals are sure-footed long-term investments at a time of inflation and chaotic markets.
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BONUS STEP: claim your free stagflation survival guide
We’re facing one of the worst crises in decades and I don’t want you to face it alone.
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Contributing Editor, Fortune & Freedom