Investing in an inflationary environment can be challenging. The markets have been volatile, but stocks have trended steadily higher with corporate earnings.
In stagflation, cash and bonds are usually below the rate of inflation, while certain stocks might not fare much better. It is important to invest into assets that will keep up with the rate of inflation.
The US economy is in a state of stagflation and it's been that way for quite some time now. The recent rise in interest rates won't bring us out any sooner, either. We can debate about the merits of recession or no recession, but we are facing slow growth with elevated inflation levels for the foreseeable future.
The Federal Reserve has been trying to bring down inflation, but their efforts can only address demand-driven inflation. It will be interesting to see how the Fed navigates tightening in this stagflationary environment, particularly now that the yield curve is inverted, which is normally a predictor of future recessions.
What We Like in Times of Stagflation:
- Long precious metals, but using no loss stops, as the volatility is such where anything can happen. We exercise risk management and are actively trading gold, silver, copper, soft commodities, and energy.
- EVs like Ford and TSLA. The EV market hill hit $2.5 trillion in 2026; the EV revolution is upon us.Governments are supporting the transition to EVs. Critical minerals are essential for electrifying cars and these minerals are the backbone of the electric vehicle revolution to come. Rising demand from China will drive the electric vehicle (EV) global industry growth.
- We are long solar energy stocks, but valuations are running rich and many of same themes towards renewable energy are attractive.
- We are watching consumer staples, energy, biotech, and genomics.
Investor expectations of slowing economic growth worldwide have led to a decline in commodity prices in recent weeks, including oil, copper, wheat and corn. Those prices had risen sharply following the Russian invasion of Ukraine.
Almost all economic indicators are weakening. We had two consecutive quarters of negative GDP growth, and elevated inflation will be the norm, or stagflation should be considered the "new' normal. Core inflation will be sticky and will stay us much longer than people think.
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Mish in the Media
In this appearance on Bloomberg TV, Mish goes through the quagmire of yields--too soft or too high--during stagflation, plus investments to watch.
In this appearance on Business First AM, Mish explains why certain intermarket relationships matter right now.
Mish talks big tech earnings and how long we can expect growth to outperform on Cheddar TV.
Read Mish's latest article for CMC Markets, titled "A Trendsetting Week in the Markets (Part 1 of 2)".
ETF Summary
- S&P 500 (SPY): 403 now closest support with 417 resistance.
- Russell 2000 (IWM): 182.50-183.50 support; maybe move to 190 next.
- Dow (DIA): 322-323 support now, 331 next resistance.
- Nasdaq (QQQ): 308.55 support with resistance 319.
- KRE (Regional Banks): 60 key support, 65 resistance.
- SMH (Semiconductors): 230 now pivotal support; 237.50 some resistance.
- IYT (Transportation): The demand side transport sector cleared the base and now must hold 229.50.
- IBB (Biotechnology): 125 key to close above.
- XRT (Retail): 62 now support to hold with 66.25 big resistance.
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
