With its combination of high inflation, weak growth, and job market jitters, stagflation screws with your money.
Here's how to manage your money to fight back against stagflation, why this matters, and what you can do today.
Best Places for Your Money During Stagflation
| Asset Class | Performance in Stagflation | Why It Works | Quick Action Step |
|---|---|---|---|
| Real Estate (Commercial/Short-Term Rentals) | Strong if cash-flowing; mixed for residential. | Rents often rise with inflation; commercial properties dodge oversupply. | Check local Airbnb yields or REITs like VNQ for exposure. |
| TIPS and I-Bonds | Consistent real returns. | Principal adjusts with CPI; shields against inflation spikes. | Buy TIPS via TreasuryDirect or ETFs (e.g., TIP); max I-Bonds ($15k/year). |
| Value Stocks (Necessities Sectors) | Outperform growth; 5-7% real returns in 1970s. | Consumer staples, energy pass on costs (e.g., PG, XOM). | Screen for low P/E stocks in food, healthcare; start with SPDR SXLK. |
| Short-Term Fixed Income | Stable, low volatility. | Less sensitive to rate hikes; preserves capital. | Shift bonds to 1-3 year Treasuries or ETFs like SHY. |
| Gold/Silver | Gold +400% in 1970s; silver volatile. | Hedge when trust in fiat erodes; not a cure-all. | Allocate 5-10% to GLD or physical gold; avoid overbuying. |
60-Second Action Plan
If you do nothing else, take these 3 steps today:
- Move 10% of cash to TIPS or I-Bonds for inflation protection.
- Check your portfolio — swap growth stocks for value in staples or energy.
- Set a Google Alert for “CPI” to track inflation trends.
Bottom Line: Consider shifting at least 15% of your portfolio to TIPS and energy stocks, keeping 3-4 months' cash for flexibility, and eyeing a local rental property for passive income. Stagflation's a grind, but smart moves keep you ahead.
Why You Should Care About Stagflation
You’ve heard the news.
Inflation is at 2.8% (Feb 2025), unemployment at 4.1%, and GDP growth at 2.4% (Q4 2024).
While not as severe as the 1970s, these indicators suggest economic challenges ahead.
Consumer confidence has plunged to a 12-year low in March 2025, followed by a further drop to 50.8 in April (lowest since June 2022), driven by concerns about trade wars and tariffs.
Your savings, investments, and retirement plans are on the line.
It’s probably a good idea to take a few steps that can help protect your money.
Asset-by-Asset Stagflation Survival Guide
Cash
Is cash good during stagflation? Yes, but only for emergencies and opportunities.
Inflation eats cash at 2.8% a year — $10,000 loses $280 real value annually. Keep 6-12 months' expenses in a high-yield savings account (4% yields exist).
Use it to cover basics or pounce on undervalued assets when markets dip.
Action: Open a high-yield account at Ally or Marcus; don't hoard beyond a year's needs.
Real Estate
What happens to property during stagflation? It depends on cash flow, location, and type.
Commercial and short-term rentals thrive as rents track inflation (1970s: real estate returned 6% real, though performance was mixed by region).
Residential can stall if rates spike (mortgages range from 6.62% to 7.07% now).
Avoid overleveraged flips.
Action: Research markets with strong job growth; consider REITs (VNQ) for liquidity or a duplex for rental income.
Stocks
Which stocks perform best? Value stocks in necessities — think food, healthcare, energy — beat the pack.
In the 1970s, consumer staples gained 7% real returns while tech tanked. Companies like Kroger or Chevron pass on costs.
Avoid speculative growth (AI startups).
Action: Allocate 20% to XLP (staples ETF) or screen for P/E under 15 in healthcare.
Gold / Silver
Do precious metals protect you? Data says yes, but within limits.
Gold soared 400% from 1973-1980; silver's wilder but less reliable.
These precious metals shine when inflation fears peak but crash when rates stabilize. Consider limiting them to 5-10% of your portfolio.
Action: Buy GLD or a gold coin; skip silver unless you're risk-tolerant.
Bonds and Fixed Income
What rate moves should you expect? Rates are rising (Fed funds at 4.33% now, with a target range of 4.25%-4.50%) to fight inflation, crushing long-term bonds.
Short-term Treasuries (1-3 years) hold steady, yielding 4-5%.
TIPS are better, adjusting for CPI.
Action: Swap bond funds for SHY or VTIP; lock in I-Bonds if you haven't.
Stagflation Playbook by Life Stage
Under 40: Stagflation is an opportunity if you play it right
- Max retirement contributions: Push 401(k)/IRA to the limit ($23,500/$7,000 for 2025, plus catch-up contributions if eligible).
- Skew toward value stocks: Build wealth with staples, energy (30% portfolio).
- Learn skills: Upskill to dodge layoffs — AI, trades are hot.
Why: Your long horizon lets you ride volatility and buy dips cheap.
40-60: Protect gains while building wealth
- Diversify hard: 20% TIPS, 20% value stocks, 10% real estate.
- Pay off debt: Clear credit cards, lock in fixed mortgages.
- Side hustle: Gig work adds a buffer if jobs wobble.
Why: You're peak earning — don't let inflation or layoffs derail you.
Near Retirement: Insulate your nest egg
- Shift to safety: 30% TIPS/I-Bonds, 20% cash, cut growth stocks.
- Delay Social Security: Wait to 70 for 8% annual bumps (if born in 1943 or later).
- Model expenses: Assume 4% inflation for healthcare, housing.
Why: Short timeframes mean you can't recover from big losses.
In Retirement: Stretch your income
- Live lean: Cut subscriptions, travel; prioritize healthcare.
- Dynamic withdrawals: Drop from 4% to 3% in bad years.
- Part-time work: Consulting or tutoring offsets inflation.
Why: Fixed income gets crushed — flexibility saves your principal.
Historical Data: What Actually Worked Last Time
In the 1970s stagflation (1973-1982), these crushed it:
- Consumer staples stocks: +7% real returns (Coca-Cola, General Mills).
- Energy: +9% real (Exxon, Chevron rode oil shocks).
- Gold: +400% nominal gains.
- TIPS precursors: Short-term Treasuries held steady.
- Real estate: Rentals yielded 6% real with rent hikes (though performance varied by region).
Losers? Tech stocks (-2% real), long-term bonds (-5% real), cash (-7% real).
How to use this right now: Focus on staples/energy (XLE/XLP ETFs), cap gold at 10%, and pick cash-flowing rentals over speculative flips.
Tariffs and AI shifts change the game — vet sectors for pricing power.
Your 3-Step Stagflation Protection Plan
Open a TreasuryDirect account; buy $5k in I-Bonds or TIPS. Takes 10 minutes.
Then, rebalance portfolio — 10% TIPS, 20% value stocks (XLP/XLE), 5% gold. Call your broker or DIY via a service like Vanguard.
Next, calculate a budget assuming 4% inflation. Cut non-essentials (e.g., streaming). Save the difference in a high-yield account.
If you’re prepping for a bumpy ride — locking in TIPS, betting on energy, and keeping cash to snag deals makes sense.
You don't need to panic, but you do need to move. Stay invested, but tilt toward what's worked before: value, income, flexibility.
Stagflation's a thief, but you're not helpless. Put your money where inflation can't touch it — TIPS, staples, rentals — and act before the squeeze tightens.
Your Stagflation FAQs Answered
Will interest rates rise?
Forecasts suggest possible cuts later in 2025, but concerns about inflation, especially related to tariffs, could limit or delay these cuts. Shift to short-term bonds now.
You might want to avoid 10-year bonds — too much rate risk.
Is real estate a safe bet?
Only if it cash flows. Rentals beat inflation; spec houses don't. Check local job growth first. I would scout for duplexes, not McMansions.
Should I sell stocks?
No, but pivot. Swap tech for staples, energy. History shows value wins.
Does gold always work?
Nope. It spikes early, fades late. Which is why, limit to 10% of your portfolio. Owning a gold ETF is an insurance, not a jackpot.
What about crypto?
Too volatile. Bitcoin crashed 30% in 1970s-style shocks. Stick to gold for hedges. I wouldn’t bet big on crypto right now — stagflation is not a time for gambling.
Where to from here
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