What Is Stagflation?

What Investors Need to Know

Mar 30, 2022

You may have heard the term “stagflation” in recent days and wondered, what it is and why does it matter to me? Stagflation is the combination of a stagnant economy and inflation. Put another way, stagflation occurs when an economy’s gross domestic product (GDP) declines at the same time that the price of goods and services rises (inflation).

Now that the conditions for stagflation are returning to the United States for the first time since the 1970’s, economists and investors are beginning to take note. And for good reason.

Stagflation can put a serious dent in your savings and traditional investments. Typically, when the ability to earn decreases, so do investor appetites. Worse, inflation can eat away at the value of existing gains. So, while it will still take more economic data to see if GDP is declining enough to warrant stagflation, now is a good time for investors to plan ahead.

Planning Ahead

Finding financial instruments that can act as a cash hedge or provide downside protection are great ways to counterbalance the potential for stagflation. To outpace inflation, investors must currently earn more than 7.9% APY on their investments. Here, cryptocurrency yield funds and alternative investments may help.¹

Securitize offers this ability today. For instance, Securitize Capital offers investors a variety of cryptocurrency yield products and Securitize Markets² offers access to alternative assets, which have traditionally had a low correlation with the stock market. Together, these instruments may provide investors with a way to counteract the inflation part of stagflation.³

Should the economy continue to slow, income earned from yield products has the potential to offset the increased price of goods and services. While risks such as a potential lack of liquidity should be taken into account, by using cryptocurrency yield as passive income, investors can focus on earning a living themselves. This way, if the economy slows down, you don’t have to.

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