• We think the new word that’s going to be in the headlines is “stagflation.”
• What is stagflation? Why is it such a scary economic term? What are we doing in case it takes hold?
• Stagflation is a situation in which you see very high inflation at the same time that economic growth goes down and unemployment goes up.
• It doesn’t happen often because typically economic growth causes inflation and recessionary factors typically cause disinflation.
• But when you combine high inflation with an economic slowdown, it can put the Fed in a very difficult position.
• If the Fed lowers interest rates to address a recession, it causes inflation, but we’ve already got inflation so we don’t want that.
• But if they raise interest rates to fight inflation, that’ll cause the recession to get worse.
• So, it puts the Fed between a rock and a hard place.
• Overseas, we’ve seen stagflation in the UK in the 70s.
• Oil prices ramped up, which led to inflationary policies. They also had deficit spending and high unemployment for almost a decade.
• Margaret Thatcher stepped in as prime minister and forced high interest rates and restricted monetary policy to kill inflation.
• They also spurred economic growth with privatization of certain industries that were state owned and austerity measures on government spending.
• The UK went through a recession, but it stabilized their economy and they boomed from there.
• We also had stagflation in the US during a similar time period.
• Oil shock led to stagflation here that persisted for almost a decade.
• Ronald Reagan and Paul Volcker eventually raised interest rates to 20% to kill stagflation.
• Can you imagine 20% today!
• Stagflation is really bad and hard to get rid of.
• We think you’re going to start hearing it a lot in the headlines, so we wanted to address it and tell you our strategic position when it comes to dealing with it.
• Fortunately, we’ve put some measures already by reducing risk on the risky parts of our portfolio and put that money into our money market fund.
• That should continue to pay fairly well if the Fed has to continue to fight inflation.
• Right now, we are positioned well and have very good diversification.
• We are assessing the whole portfolio to make sure we are prepared to deal with that type of event.
• Having said that, we give stagflation a very low probability.
• If these trade deals get done, and we see some big deals come, we could see the market go up significantly.
• Typically, stagflationary periods are driven by a single supply shock of an event.
• The good news here is that we could sidestep this and potentially not deal with that type of event.

Ken Moraif: Hello everyone, and welcome to our Market Alert video for today, which is May 2, 2025 I hope this video finds you healthy, wealthy and wise. We have a lot to cover, not the least of which is what’s going to be in the headlines. And what you’re going to hear a lot of people talking about is stagflation and so Jordan and I wanted to – I have Jordan here with me, our Chief Investment Officer, and we’re gonna be talking about what, how we are positioned, what we’re doing in case stagflation does take hold. Because, as always, we want to give you peace of mind and let us get the gray hair so that you don’t have to so let me bring in Jordan. Hey Jordan, good to see you. You’re looking you’re Looking very dapper there.
Jordan Roach: Appreciate it good to see you. And, oh, by the way, I haven’t said congratulations. 40th wedding anniversary over the weekend.
KM: Yeah, 40th wedding anniversary is, right. I think it’s, it’s Fay’s happiest 25 years of Fay’s life is the last 40 years of being married to me. So yeah, but thank you for saying that. Yeah, crazy. 40 years. I used to think people who were 40 years old were old. Now I got a 40 anyway. So let’s talk about stagflation. So first of all, what is stagflation? Tell us what that is.
JR: Well, Stagflation is something we don’t want to see on average. I mean, that’s something where, effectively, you see very high inflation, inflation rising at the same time you’re seeing economic growth go down and unemployment go up. So it’s a rare thing, but it is not a fun pill to swallow, and it’s something where it’s it doesn’t happen often, because typically the things that would cause inflation, which is usually economic growth, what we’re seeing the opposite, or when you see usually unemployment being low, that’s usually recessionary, which causes disinflation. So it’s this rare medicine where, you know, you can get prescribed something for the doctor, and they say, as long as you don’t have this, it works. But if you combine this with that, we don’t know what to do, right? And that’s what this is.
KM: Okay, and so it puts the Fed in a very difficult position, very difficult right? Because if they lower interest rates, because we’re heading into stagnation recession, it causes inflation, yes, and we’ve already got that, so we don’t want that, but if they raise interest rates to fight inflation, then that’ll cause recession to get worse. So they’re kind of between a rock and a hard place.
JR: It’s where they got to put their dual mandate, or to fight a war with itself
KM: So has this happened anywhere in the world before? I mean, overseas that we’ve seen that happening.
JR: We have seen in a few places. You know, one place that’s, I guess, economically, is probably more akin to where we are would be the UK, okay, in the 70s, in the 70s.
KM: So this is recently, then it’s fairly recently, yeah.
JR: So you basically saw oil prices ramp up that led to inflationary policies. Everywhere you had had deficit spending so very loose monetary policy. There you had kind of stagnation with their labor, and it led to stagflation and very high unemployment for almost a decade.
KM: And this was Margaret Thatcher had to step in, right? That’s right, she was prime minister, and they basically had to force high interest rates to kill inflation and get it out of the system.
JR: That’s right, they did. They did a few things. So they did. They restricted monetary policy to time to deal with inflation, but the same time you have to deal with the well, how do we spur economic growth? And so they led to some innovation, some privatization of certain industries that were state owned, um, they led to austerity measures of kind of restrict government spending. And ultimately, even though they went through recession, it stabilized their economy, and then they kind of boomed from there.
KM: Now we’ve had stagflation in this country also, haven’t we?
JR: Similar time period, that’s right, yeah. So this started really in the early 70s, kind of 73-74 OPEC, effectively curtail production. Oil prices ramped up the oil shock, yeah. And that led to, you know, stagflation here that persisted for almost a decade.
KM: And this was Ronald Reagan and Paul Volcker eventually, were the ones that said, Okay, we got to kill this thing. That’s right, and to fix that, they raised interest rates to 20%.
JR: 20% can we imagine? We thought 5%
KM: Yeah, imagine if that was happening today, and the Federal Reserve was saying, Okay, we’re gonna raise interest rates to 20% to kill this inflation. That’s right. So Stagflation is a really, really bad thing. It’s very bad, and so we’re gonna hear a lot about it, but I want to give people some peace of mind with this video. So tell us what we’re doing, how we’re viewing it, what you know, what’s our strategic position when it comes to dealing with potential stagflation?
JR: So, you know, fortunately, we have put some measures already. So on the on the risky parts of our portfolio, the stock side, obviously we’re already halfway sold, yes, so we kind of reduced risk there, because know that stagflation, broadly speaking, there are some things that can perform, but the stock market as a whole, usually during stagflation has trouble. So we reduce risk there. We put that money into cash. Now, again, if the Fed starts having to continue to fight or is worried about inflation, cash should continue to pay fairly well. So we have money parked there, which is good. And then we’re reassessing, really the whole portfolio, just to say, you know, right now, we are positioned well, and we have very good diversification, which is a huge thing here, because we don’t know exactly what industries will do well, but we are trying to look at and say, Well, you know, things like utilities or consumer staples, money that people are going to have to spend to support these industries, regardless of economic growth, do we need more there? Are there things like precious metals or commodities that maybe could perform well? So we’re just assessing the whole portfolio to make sure we are prepared to deal with that type of event.
KM: So we’re already thinking about it. We’re minding the store. Yeah. So everybody you know know that we’re on we’re on top of that. We give it a very low probability, however, having said that, we just wanted to talk about it, because it’s going to be the word, you know, stagflation starting, yeah, starting to be the thing. But the other side of the coin is that, if these trade deals get done, and we see the European Union come in and, you know, all of that, China probably the last one. But if we get some big deals come, we could see the market go up significantly, go the other direction, right?
JR: That’s right. I mean, the good news, that’s exactly right. And the good news, if you will, is typically stagflationary periods are driven by, like a single supply shock of an event. Well, the good news here, I think, is that events cannot happen or get unwound very quickly, so that could lead us to be, you know, reasonably cautious, but yet optimistic that we could sidescape this and we don’t have to potentially deal with that type of event. Yeah.
KM: Okay, so ladies and gentlemen, I hope that this gave you a little inkling as to what Stagflation is, how terrible it can be why we think it’s unlikely to happen, but if it does, we are ready to deal with it. We’re thinking about it. We’re planning ahead. So hopefully this gives you the peace of mind of knowing it. And for all of you out there in SCWPerS Nation, I hope you are SCWPering your little tails off. I hope we have to send our our SCWPerS tail clean up crews all over the place, to pick up after you. I hope you’re enjoying your second childhood and not worrying about all this boring financial stuff. Make sure you like and subscribe to these videos. It really helps us a lot. And also make sure you forward it to all your friends and family, because I know that they’re worried about what’s going on right now, and you can give them some peace of mind as well. So thanks for watching, and we’ll talk soon.

Please note: transcript has been modified after the time of recording. 

Economic indicators and stock market performance cannot be predicted. Opinions expressed regarding the economy and the stock market belong solely to Ken Moraif on behalf of Retirement Planners of America and may not accurately portray actual future performance of the economy or stock market outcomes. Opinions expressed in this video is intended to be for informational purposes only and is not intended to be used as investment advice for individuals who are not clients of Retirement Planners of America. All content provided is the opinion of Ken Moraif, CEO and Founder of RPOA Advisors, Inc. (d/b/a Retirement Planners of America ) (“Retirement Planners of America”, “RPOA”). ©Copyright 2023