Take a deep breath. Stagflation Isn’t New.
CNN’s been talking about it. So has MSNBC, Fox, The New York Times, The Wall Street Journal, and just about every other media outlet that exists.
Stagflation seems to be the financial topic du jour. And for some Americans, it’s a new term, although it’s a financial phenomenon that has come and gone previously. So, what exactly is stagflation?
By definition, stagflation is an economic season characterized by slow or stagnant economic growth and rising inflation. Stagflation as a phenomenon first made its debut in the 1960s and returned in the 1970s, as global economies struggled with lower output in the face of a crippling oil crisis.
Since then, according to Investopedia, periods of slow growth have been coupled with rising prices as the norm rather than the exception — which means, stagflation has come and gone to varying degrees for the past five decades.
While inflation can create financial stress for everyday American consumers, the Misery Index is a tool used by economists and politicians to measure the burden of stagflation on the public. Measured separately, the burdens created by high unemployment or high inflation may be relatively low. But measured together, the two could paint a more accurate picture of Main Street.
And, over the years, the original Misery Index has been revised and exported to specific industries — like the Bitcoin Misery Index, for example.
So, with a seemingly ever-present conversation about stagflation, just how miserable are we, collectively? At a reading of 11.86 in April, the U.S. is closer to the all-time low at 2.97 for misery than the all-time high at 21.98.
Which is to say, it could be worse.
And, since today’s economy is more globally influenced than ever before, it’s safe to assume the situation could change quickly — in either direction. For example, The Washington Post reports that ongoing global challenges, such as the Russian war in Ukraine, new COVID variants, and continued supply chain issues, could hamper economic growth.
Stagflation is just one of the reasons why investors should work with a reputable financial advisor who has their best interests in mind. Investors working with an advisor aren’t nearly as rattled by these types of predictable economic cycles as those who go it alone or use an advisor who isn’t looking out for them in advance.
Economic downturns, turbulent markets, and even stagflation can and should be expected. They should and need to be part of any investment conversation with an advisor. Because planning for certain financial phenomena makes a world of difference from a stress perspective and a financial one.
At Rosevest Financial, we plan for the volatile financial seasons as earnestly as we plan for the exceptional ones. To discuss our approach to planning in more detail, or to learn how to better protect your assets, contact us.
We’d be happy to develop a customized investment plan that prepares you for whatever is on the horizon.
Everyone’s needs are unique. Contact us so we can answer your questions and discuss your specific investment needs.