Can You Profit in Times of Crisis?
The term stagflation has gained prominence in America, referring to the combination of slow or stagnant economic growth with high inflation.
Prices rise, eroding purchasing power, while the economy does not grow enough to sustain robust job creation and corporate profits.
Yet, despite the seemingly negative outlook, there are strategies that allow not only for wealth preservation but also for generating profits in times of stagflation.
What Is Stagflation and Why Does It Matter?
Stagflation combines three elements: weak or zero economic growth, high inflation, and elevated unemployment.
A combination of factors has fueled this dynamic: supply shocks (such as rising energy and transportation costs), changes in fiscal and monetary policy, and international instability affecting consumer and business confidence.
Historically, stagflation is a nightmare for policymakers, as traditional measures to control inflation (such as raising interest rates) tend to further slow growth.
Impact on the Everyday U.S. Investor
For the average investor, stagflation directly affects three fronts: real income, the stock market, and the fixed-income market.
In addition, volatility rises: risk assets like stocks face sharp declines, while commodities and currencies move in more unpredictable ways.
Tactics to Invest and Profit in Times of Stagflation
Invest in commodities and energy
Commodities such as oil, natural gas, and precious metals tend to maintain or even increase in value during high inflation, as their prices are directly linked to the cost of goods and services.
- Oil and energy: Companies in the sector (such as ExxonMobil and Chevron) can benefit from elevated prices.
- Gold: A traditional “safe haven” in times of instability, used to protect against the loss of purchasing power.
Bet on Defensive Sectors
Sectors such as healthcare, utilities, and basic consumer goods tend to have stable demand even when the economy slows.
Companies providing essential products often maintain cash flow and dividends.
- Examples: Johnson & Johnson (healthcare), Duke Energy (electric power), Procter & Gamble (consumer goods).
Specific Real Estate Investment Trusts (REITs)
Not all real estate performs well during stagflation, but REITs in sectors with inflation-indexed contracts — such as logistics warehouses and healthcare properties — can protect investors.
- Benefit: the ability to pass price increases to tenants, keeping revenues inflation-adjusted.
Inflation-Protected Securities (TIPS)
In the U.S., Treasury Inflation-Protected Securities are Treasury bonds that adjust their principal value according to inflation as measured by the CPI.
They are a way to preserve purchasing power with low credit risk.
Companies With Strong Pricing Power
Businesses that can pass on higher costs to the end consumer without losing demand have an advantage. These are typically well-established brands or companies in markets with little competition.
- Example: Coca-Cola, which maintains stable sales even during periods of high prices.
Diversification and Risk Management: More Important Than Ever
In a period of stagflation, concentrating investments in a single type of asset can increase risk.
A balanced portfolio should contain a mix of defensive stocks, commodities, inflation-linked bonds, and possibly some cash to take advantage of buying opportunities during market corrections.
Tools like thematic ETFs can help, offering diversified exposure to sectors such as energy or precious metals without requiring individual stock or commodity purchases.
This approach can bring greater security to your investments in day-to-day market conditions.
The Role of the Dollar and Global Markets
Although the U.S. dollar is a strong global reserve currency, in a stagflation scenario it may face pressure —especially if interest rates do not offset real inflation.
Some investors choose exposure to currencies of commodity-exporting countries (such as the Canadian dollar or Australian dollar) for currency diversification.
Common Mistakes When Investing During Stagflation
- Ignoring real inflation – looking only at nominal returns can lead to poor decisions.
- Taking on excessive risk in search of quick gains – high volatility can result in significant losses.
- Maintaining very low liquidity – opportunities arise, but they require available capital.
The consensus among analysts is that, even if the U.S. does not enter a prolonged period of stagflation like in the 1970s, elements of this dynamic may persist.
The general recommendation is to maintain a resilient portfolio, capable of adapting to rapid changes, with special attention to assets that offer inflation protection and stability during periods of low growth.