The specter of stagflation has haunted Wall Street for months now as supply shortages and continued shipping delays cause investor panic
Oct. 12, 2021
It’s been a quiet week so far as we head into the final earnings season of the year, but that doesn’t mean we haven’t got a lot to discuss.
And one worry that seems to be bouncing around the ‘inverstorsphere’ is that of stagflation.
But what exactly is ‘stagflation’?
Stagflation is commonly referred to as recession-inflation. This period is known as an economic phenomenon marked by rising high inflation, high unemployment rates, and a stagnant (or sluggish) economy.
Throughout history, rising inflation and high employment has negatively impacted economic growth in major markets, which has then gone on to affect investors. During a time of stagflation, people are generally earning less while spending more on products and services which have risen due to inflation being high. And now, the International Monetary Fund (IMF) is warning of impending stagflation thanks to weaker global growth, vaccine protectionism, and inflation in larger economies.
So, now you know what it is, what can you do about it?
- The ultimate tip is to be a long-term investor. In doing so, you’ll not have to worry about cyclical or short-term economic factors such as this. A solid, long-term investment portfolio is the best way to limit risks associated with stagflation.
- If you’re still losing sleep over your portfolio and this spooky buzzword, then it might be time to reassess your own risk tolerance. Diversify your portfolio, invest in value stocks to balance out the riskier growth companies, or consider ETFs.
Stagflation is trending at the moment and, as we know all too well, trending topics tend to get a little bit out of hand when it comes to the investing community — *ahem* GameStop *ahem*. So, read up about stagflation, whether it’s actually of concern to your portfolio, and consider a long-term buy-and-hold strategy.
Read all about stagflation investing here.
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