Stagflation seems to be around the corner with current conditions showing an uncanny resemblance to the 1970s period where stagflation was the theme.
If the 1970s playbook unfolds, we could still see the last surge for the strongest and best quality companies which is not excessively valued before the market fizzles off.
In a stagflation environment, the market would likely just consolidate and trade range-bound which would lead to a lost decade just like the 1968-1981 period. Due to the high inflation, there will be negative real returns.
The main goal for investing during this period is to preserve your capital and so investment in real assets such as property, gold, commodities and REITS have historically performed relatively well during this stage of the business cycle.
Crazy returns of the Ark funds era could be a thing of the past as funds would be very selective and would go for companies that actually generate profits, cash flow and not just a good concept. This is especially so as a tighter monetary policy would be the norm in this environment and liquidity would not be in excess.
It is going to be a tough time to navigate the investment landscape if stagflation does occur. We hope a revisit to the 1970s helps you to come up with a game plan.
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