Macro Folks/Economists - How Would You Position A Portfolio for Stagflation?

I'm not saying this will 100% happen, but I'm getting more worried as the months go by that this will be a poor decade for returns and that we might experience a very nasty stagflation scenario in the somewhat near future. I am not a macro guy, but whatever little I've researched on the subjects suggests to me that stagflation tends to arise from supply-side shocks coupled with questionable monetary policy (i.e. too much government spending). 

This might be a hot take, but I feel like much of the inflation we're feeling these days is due to multiple supply shocks. With the Fed raising rates and economic growth stunting, I think we'll soon start seeing the "pain" Powell referenced in his speech in that unemployment is going to start creeping up and growth is going to be harder to come by as the rate hikes start filtering through the economy.

My questions are:

  1. Is this logic correct regarding how stagflation occurs and is anyone else concerned about such a scenario unfolding? I feel like the market consensus is we're in a recession, but it'll be mild and we'll get out of it quickly. I'm a bit concerned this won't be a quick dip and rapid rise like we've seen in markets lately when there's a weakness because this mess is more widespread and will require time/investment to get out of.

  2. What are you all investing in lately, especially if such a scenario were to occur, to protect your wealth, besides energy/O&G equities? 

Thanks!

 

commenting to see responses later

Probably good place would be essential RE (residential, grocery anchor places, dollar generals, maybe healthcare).

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.
 
Most Helpful

Kinda, yeah.

I mean, I've a PhD, and I focused on macroeconomics. Off the top of my head, since stagflation is a situation of low to no economic growth combined with rising inflation, I'd focus on commodities that follow up with inflation (e.g., Gold and other metals) and avoid anything that follows the economy more broadly (e.g., bonds and other fixed income securities). But this is objectively very poor advice. Actual traders/investors with more direct proven experience in the market are waaaay better placed to help out.

 
DrApeman

Kinda, yeah.

I mean, I've a PhD, and I focused on macroeconomics. Off the top of my head, since stagflation is a situation of low to no economic growth combined with rising inflation, I'd focus on commodities that follow up with inflation (e.g., Gold and other metals) and avoid anything that follows the economy more broadly (e.g., bonds and other fixed income securities). But this is objectively very poor advice. Actual traders/investors with more direct proven experience in the market are waaaay better placed to help out.

I would short Gold but long other commodities lol

 

Hey, saw your comment on an old post about auditing. If you don't mind sharing a little detail I'm super curious about if you're still at a B4 or if you've made an exit. I'm wrapping up my first year as an auditor myself and wondering what the exit opps have looked like from your perspective, if the work gets any less miserable as you move upwards, etc

 

Dignissimos aut quia amet molestiae. Adipisci voluptatem in velit qui natus. Amet aut ut expedita tempore saepe. Et aut sit nisi illo architecto tempore reprehenderit.

Aut voluptates eligendi minus sapiente consequatur quia. Incidunt rerum amet facere. Enim labore est molestiae nihil et. Aliquam nobis illum tempora possimus.

Sunt quibusdam itaque aut aut assumenda. Aut quia tempore delectus aut voluptatem. Aliquam voluptatum aut modi itaque et nam. Et est libero iure nulla.

Career Advancement Opportunities

March 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Goldman Sachs 19 98.8%
  • Harris Williams & Co. (++) 98.3%
  • Lazard Freres 02 97.7%
  • JPMorgan Chase 03 97.1%

Overall Employee Satisfaction

March 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

March 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

March 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (19) $385
  • Associates (86) $261
  • 3rd+ Year Analyst (13) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (66) $168
  • 1st Year Analyst (202) $159
  • Intern/Summer Analyst (144) $101
notes
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”

Leaderboard

1
redever's picture
redever
99.2
2
Secyh62's picture
Secyh62
99.0
3
BankonBanking's picture
BankonBanking
99.0
4
Betsy Massar's picture
Betsy Massar
99.0
5
CompBanker's picture
CompBanker
98.9
6
dosk17's picture
dosk17
98.9
7
GameTheory's picture
GameTheory
98.9
8
DrApeman's picture
DrApeman
98.9
9
kanon's picture
kanon
98.9
10
bolo up's picture
bolo up
98.8
success
From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”