5 Best Investments For Stagflation

Our list of the 5 best investments for stagflation will keep you soaring even if the economy continues to sour. Stagflation is an economic term that describes a situation where a country's inflation and unemployment rates are high at the same time. This is worrisome for obvious reasons because people have less jobs while prices for goods are increasing. Fear not, and follow these guidelines for advice to weather the storm.

  1. Buy some gold. Gold, long viewed as a hedge against major market upheavals, is traditionally where investors head if they are scared of investing in the stock market–this is no different when stagflation hits, because gold is viewed as a safe, less volatile investment vehicle. Gold should do well as long as worldwide monetary policy stays lax.
  2. Simultaneously short and long the market. Shorting (betting stocks will go down) and longing (betting stocks will go up) the market is an advisable position to take during stagflation. The reason is that committing to one direction (either shorting or longing) will do serious financial damage to you. To hedge against this, short things like silver and crude oil while going long in bonds.
  3. Invest in foreign markets. Other markets apart from the US ones may be a good bet in protecting yourself from stagflation. The reason for this is because some of those markets are on different cycles and haven't had significant inflation. Thus, stagflation is not risk as a result. Since about 2003, inflation in Japan is around zero, and Japanese companies not dependent on exports may thrive.
  4. Invest in resource stocks. Resource stocks are ones like mining companies, and sometimes during stagflation, commodity prices get really high. With said prices high, resource stocks ought to benefit in a direct relationship, meaning they'll likely increase in tandem with the commodity prices.
  5. Invest in Housing. Despite the dilemma with the housing sector for the past couple of years, in cases of stagflation, investing in housing is a great defense strategy. The reasoning behind this is that even during stagflation, people have to live somewhere, and this may be especially true after the huge drop in housing prices in the last couple of years.


Money Morning: How to Survive Stagflation

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