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In this episode of Stocks in Translation, Kevin Gordon, Director and Senior Investment Strategist at Charles Schwab (SCHW), joins Markets and Data Editor Jared Blikre and Producer Sydnee Fried to discuss stagflation and its effects on the economy.
According to Blikre, stagflation is an economic condition characterized by simultaneous “high inflation, stagnant economic growth, and elevated unemployment."
The last time the US experienced significant stagflation was in the 1970s, when the country experienced high inflation and uneven economic growth.
Gordon shares the strategists’ view on stagflation. “It’s important [to] emphasize the difference[s]” of stagflation.
“Uppercase S, being the instance of the seventies into the eighties when you had what we call the misery rate,” says Gordon. The era was marked by energy crises and the 1973- 1975 recession. “[The] unemployment rate combined with the inflation rate… getting, you know, well into double digits really spiking. It was kind of that max pessimism period.”
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“Little s” refers to the “extreme ends of what's being proposed for a tariff policy, what's being proposed for immigration policy, and… fiscal policy,” says Gordon.
Stagflation can be a scary scenario, but there are steps you can take to hedge or prepare.
“A good inflation [hedge] over time tends to be US equities,” says Gordon. “If you break it down by decade, um, decade by decade, the only asset class that has outperformed inflation consistently is US small caps.”
Twice a week, Stocks In Translation cuts through the market mayhem, noisy numbers and hyperbole to give you the information you need to make the right trade for your portfolio. You can find more episodes here, or watch on your favorite streaming service.
This post was written by John Tejada.