Investing in a stagflation environment?

[steadyeddy]

This thread is to stimulate a conversation on how to construct a portfolio for an environment of stagflation: high inflation and low growth.

The thread is NOT to debate if we will see stagflation.

My understanding is that both stocks and bonds would struggle during periods of stagflation. So, how does one go about investing?

Appreciate your thoughts.

[Fearchar]

Quick google search turned up the following:

BTG $4.53
VALE $19.97
OVV $53.84
BHP $75.59
NTR $106.69

www.kiplinger.com/investing/stocks/604318/5-superb-stocks-to-shield-against-stagflation#:~:text=Just%20like%20metals%20and%20energy,when%20food%20prices%20are%20rising.

[alvinthechipmunk]

CX.

Will Cemex not have a part in helping to rebuild Ukraine?
"Cemex is the largest ready-mix concrete company and one of the largest aggregates companies in the world." (Morningstar.) Grossly undervalued right now and doesn't bother to pay a dividend.

Anyhow, stagflation: pernicious inflation that won't go away, reducing the value of profits generated. How do we beat it?
Put TSM on the list?
www.cnbc.com/2021/11/12/how-to-invest-around-stagflation-inflation-risks-says-analysts.html

[oldskeet]

Hi steadyeddy ,

Good time to start a thread such as this.

For me, I think that it is important to know the history of stagflation and by knowing its history and its causes and effects then one can determine what asset classes have done well in the past. Being 74 years of age I remember the 70's and 80's where stagflation was rampart.

For me, my good dividend paying funds did well along with commodity type stocks and a few foreign stock funds.  Today, my portfolio has a wider investment spectrum.

As a refresher, I located this article which pretty much covers the subject and makes some investment suggestions for investors to consider.

financhill.com/blog/investing/what-assets-do-well-during-stagflation

Since, I have a portfolio that tilts towards value (the dividend payers) and contains some foreign equity positions as well I plan to just keeping-on and have no plans to make any special moves within my portfolio. After all, I run what is called an all weather asset allocation model that contains a wide spectrum of investment positions.

[steelpony10]

steadyeddy ,

        Easy. At least adding CEF’s to a group of income holdings creating a group generating income up to or above the 7.25% inflation rate from 1970-1979. Use your dead bond holdings for an investment source. We first use these investments around 9/11 for a parent. Leveraged bonds can be a supplement, temporary or permanent solution when inadequate income from dividends and equities fail for an unknown time period.

        inflationdata.com/Inflation/Inflation_Rate/Long_Term_Inflation.asp

        Of course doing nothing and eating your seed corn because you’re trapped otherwise for an unknown time period may work if you’re loaded or maybe cut back on spending during your golden years and wait it out indefinitely. Neither has been an option in years for us.

[uncleharley]

Historically Real Estate, Commodities, & stocks associated with the production or development of those items have done well during times of inflation. Leveraged investments also work.

[Mustang]

One of the things you might want to do is to see how funds and companies fared in the 70s and 80s. The absolute last thing I would do is look at performance during the last 30 years. That time frame is the polar opposite of stagflation.

[Fearchar]

Mar 29, 2022 10:33:58 GMT oldskeet said:

As a refresher, I located this article which pretty much covers the subject and makes some investment suggestions for investors to consider.

financhill.com/blog/investing/what-assets-do-well-during-stagflation

Just read the article. 

It made some sense until they suggested Crypto's as a viable investment option.

[FD1000]

What high income investing has to do with stagflation? No idea.
The 80s is when high-tech really took off. These successful companies made lots of money, faster than before, and hardly paid income.
Higher income stocks used to be good/better until that time because paying dividends proved their stability and earnings. The high-tech companies broke that, but this perception continue to this date and has no legs.
Similar to that are the CEFS, we discussed it many times before, see (example).

So what's the answer, it depends, as usual.
1) How high and how long inflation will be
2) In general, stocks perform better than bonds over LT.
3) What is the starting point. Are stocks + bonds cheap-expensive compare to previous history? they are not.
4) Not all bonds are treasuries.
5) Are you a LT, buy and hold investor...or...are you trade more...or, maybe you look at what markets are telling you.
Example: Do I want to own higher-rated bonds in 2021-2022? Absolutely not. You can watch rates and the Fed or disregard them.