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  • Joe DeLisi

Stagflation and your money


If we’ve learned anything over the last few years (or decades) it’s that the media is really good at scaring us. The current “thing” is to be scared over STAGFLATION.

I double checked with the CDC and while we don’t need to wear masks to help beat stagflation, there IS a “vaccine” we can take to help beat it. The “vaccine” is a healthy dose of the equities markets! What is stagflation? According to the Oxford dictionary it is persistent high inflation combined with high unemployment and stagnant demand in a country’s economy. So at it’s core, stagflation, is a really bad economy. The media and some economists believe that we are either in a period of stagflation now or we are headed that way.


What does this mean for your balance sheet?

For today, let’s just focus on one area of your balance sheet, your stock portfolio. While some in the media are going to tell you that stagflation means your returns are going to be 0 at best, we just simply can’t believe everything the media tell us. A quick Google search over 1970’s stagflation will lead you to articles and videos suggesting that in the 1970’s there was a flat or negative stock market.

But this isn’t true. It’s not even true if we price in the cost of the consumer price index. For instance, if you look at 1973 up to 1980, the consumer price index averaged 8.2%. Over the same time period the S&P500 rose about 3% (source: S&P500 index). So with that one data point alone, yep….you lost money. But as you know as a client of mine, the SP500 index is not THE market…it’s ONE market. What about small cap US stocks in the same time frame? That market rose 16% (source Ibbotson small stock index). US small value stocks rose almost 18%! (source Fama/French small value research index).

Do we want Stagflation? NO. We want a robust economy where everyone does well. We want better paying jobs with large salary growth. We want low taxes and we want free markets to deliver excellent investment returns for equity investors. But the worry that it is inevitable that you will lose money during a poor economy in your stock portfolio is rarely true. Stocks in any given year may be up or down. However in a well diversified portfolio in many different markets and in many different countries, you have historically been in a position to make good returns NET of inflation if you simply stay the course.

Should you be afraid of inflation or stagflation? Not necessarily. The question is have you built up your cash holdings in cash value of life insurance, savings and other assets? If you have, then you are able to keep your equities invested in the markets so that you not only are ok in poor economic times but that you are positioned to potentially do well over those poor economic time periods.

So the simple take away? Keep your savings rates high, your liabilities low and continue to allow us to rebalance during poor stock years into all the available markets and then let time do the work for you.


Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 5280 CARROLL CANYON ROAD, SUITE 300, SAN DIEGO CA, 92121, 619-6846400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WESTPAC WEALTH PARTNERS LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC. CA Insurance License Number - 0D34103, AR Insurance License Number - 2195027. | Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. | 2022-139459 Exp. 06/24

Indices are unmanaged, and one cannot invest directly in an index. Past performance is not a guarantee of future results. All investments contain risk and may lose value. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Investing in securities of smaller companies tends to be more volatile and less liquid than securities of larger companies. Investing in foreign securities may involve heightened risk including currency fluctuations, less liquid trading markets, greater price volatility, political and economic instability, less publicly available information and changes in tax or currency laws. Such risks are enhanced in emerging markets. The Consumer Price Index examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care and is a commonly used measure of the rate of inflation. S&P 500 Index is a market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market.

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