Are We In For A Period Of Stagflation?

Sep 10, 2021 | Economy, Financial Planning, Investing

On the Trey Ware Show, Karl Eggerss explains the interesting phase we may be entering for the economy and the impact on investors.

Trey Ware:

KTSA, usually on Mondays at this time, Karl Eggerss, creatingricherlives.com, joins us, and we talk about the markets and money. And because we were off on Monday, we’re doing it now. And a headline I’m looking at now, Karl, says, “Stock futures trade lower after the FED said economy slowed over the summer.” What are your thoughts?

Karl Eggerss:

I’m thinking, people listening really need to start thinking about the word stagflation. And I don’t know if we’ll get it what it was several years ago, but essentially what that means, Trey, and what it’s going to mean for our listener’s investments are, the economy is starting to slow. You can blame it on Delta, you can blame it on, you know, it was running so fast coming out of the pandemic a year and a half ago that it’s just slowing down. So while that’s happening, while we’re seeing the economy start to slow, at the same time, the federal reserve is watching prices go up on things. And they’re going to start taking their foot off the accelerator, it’s called tapering. They’re going to do that at the end of this year. Europe just announced it literally five minutes ago, that they are starting to do that, so we’re going to start getting less assistance from the government at the same time prices keep rising and the economy slowing a bit.

Karl Eggerss:

So I think all these things are on the margin a little bit, but what that means for investors is they really need to start thinking about, how much money do I have sitting in a money market, a CD? How much debt do I have? How much stock do I have? How much real estate commodities? Because all those things are going to move very differently based on the environment we’re going into. And so that’s what we’re spending our time doing, is making sure our clients are protected in terms of looking at that.

Karl Eggerss:

Because again, you can easily fall behind if you’re sitting with a lot of cash, because when you have a stagflation, which is, again, the economy slowing a little bit and inflation going up, you tend to have things that, again, your dollar is worthless. And so you have to have it productive and doing things for you. And that’s the real challenge, I think, for investors right now.

Trey Ware:

Well, and the old question then, Karl, is what? I mean, if you’ve got a lot of cash, what do you do? Do you buy stocks in a period of stagflation and you’ve got companies that are not growing, and so your stocks are not returning. Or, What do you do with it?

Karl Eggerss:

No, it’s a great question, because not all stocks are the same. And when we talk about stocks, let’s remember, we can talk about baskets of stocks via mutual funds or exchange-traded funds. We’re not saying people have to buy individual stocks, but certain sectors do better than others. In other words, things like maybe consumer staples, things that people have to have may do well in that environment versus really high growth companies that are relying on the economy to go up.

Karl Eggerss:

So your point’s excellent, which is we have to look at certain things because not all stocks are created equal, but real estate is not cheap, but still real assets are appreciating. That’s why we’re seeing this happen right now, and I do think people have to look at hard assets like commodities. And again, there’s numerous ways to that and you got to be careful, but those things will outpace the dollar, and that’s a real fear right now is what happens to the US dollar [crosstalk 00:03:07].

Trey Ware:

Well, yeah, but let me ask you this real quick, because I got to go. But if somebody is cash-heavy, how do they get back in now that this thing has gone up? Maybe they got out at 30,000, or 29,000, or 27,000, whatever, and now it’s at 35, hovering around that. How do they get back in without taking a blood bath? Do you just bite the bullet and get back in, or what?

Karl Eggerss:

No, you can average in. I think you do it over time. Because if you get better opportunities, you can accelerate that. But, usually when people are in that situation, they need to do it over time and average it and do it on a regular schedule. And again, you got to have a plan because if you did what you said, you didn’t stick to a plan.

Trey Ware:

Yeah, very good. That’s Karl Eggerss, creatingricherlives.com. He’s with us every Monday at this time, but because we were off on Monday, he’s here today. You can check out the podcast a little bit later on at KTSA.com.

 

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