Is the worst of both worlds returning? Understanding stagflation risk – a stagflation primer

Meketa

Research

15 Pages

Meketa Investment Group explores the rare but consequential risk of stagflation—a simultaneous rise in inflation and stagnating growth—highlighting its historical rarity and costly market implications. The analysis notes how cost-push shocks disrupt policy trade-offs and hurt most asset classes, and discusses how a preparedness mindset, diversified inflation-hedge allocation, and scenario testing provide a robust defense.

Key Takeaways

Supply‑driven shock: Supply interruptions (e.g., energy, trade tariffs) are the primary catalysts of stagflation.
Market vulnerability: In stagflation, both equities and bonds tend to underperform, eroding traditional portfolio diversification.
Hedging build‑out: Inflation-linked bonds, commodities, real assets, gold, cash, and alternatives can help protect portfolios.
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