The Stagflation Playbook
The Stagflation Playbook
During the stagflation period of 1973-1982, different asset classes performed differently. In general, stocks and bonds both struggled during this time, while hard assets like commodities and real estate tended to perform relatively well.
Here are some more details about how different asset classes performed during this period:
Stocks: The US stock market struggled during the stagflation period, with the S&P 500 index delivering an average annual return of just 1.6% from 1973-1982. This was a challenging time for investors in stocks, as high inflation and low economic growth made it difficult for many companies to generate profits.
Bonds: Fixed-income investments like bonds also underperformed during this period, as rising inflation eroded the value of their future cash flows. In addition, interest rates were generally high, which made existing bonds less attractive to investors looking for new fixed-income investments. As a result, the Barclays US Aggregate Bond Index delivered an average annual return of just 2.2% from 1973-1982.
Commodities: Commodities like gold, oil, and agricultural products tended to perform well during the stagflation period, as investors sought out hard assets that could serve as hedges against inflation. For example, gold delivered an average annual return of 25.3% from 1973-1982, while oil delivered an average annual return of 10.9%.
Real Estate: Real estate was another asset class that tended to perform well during the stagflation period, as rising inflation tended to push up the value of hard assets like buildings and land. According to the National Council of Real Estate Investment Fiduciaries (NCREIF), the average annual return for commercial real estate was 10.1% from 1973-1982.
Overall, the stagflation period of 1973-1982 was a challenging time for investors, with both stocks and bonds struggling to generate returns.
However, hard assets like commodities and real estate tended to perform relatively well, as investors sought out hedges against inflation.
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