What is Stagflation?

Stagflation is when an economy faces high inflation, slow growth, and rising unemployment—all at the same time. Normally, when the economy slows down, inflation cools off too, but in stagflation, prices stay stubbornly high while people struggle to find jobs or grow their businesses.

Imagine you’re stuck in traffic on a hot summer day. The car isn’t moving, but the AC is broken, and you're sweating buckets. That’s what stagflation feels like for the economy—growth is stagnant, but prices keep rising.

Why It’s a Big Deal

This is one of the hardest economic problems to solve because the usual fixes for inflation (raising interest rates) can make unemployment worse, and efforts to boost growth (lowering rates) can fuel even more inflation. It's a tough balancing act for policymakers.

How Stagflation Affects You

• Your money loses purchasing power—the same dollar buys less.

• Investments like stocks may struggle because businesses earn less profit.

• Job security can feel shaky as companies cut costs.

• Borrowing costs rise, making mortgages and loans more expensive.

Market Strategy Tip

During stagflation, traditional investments like bonds may not perform well because inflation erodes their value. Instead, consider hard assets and alternative investments that hold value in uncertain times.