7 Rock-Solid Tips on How to Beat Stagflation in 2024

Stagflation can be quite a devastating phase for most investors and business owners. In simple terms, this is a period when there’s high inflation, a high unemployment rate, and slow economic growth.

Fortunately, there are a few super-effective ways to beat stagflation!

This guide covers everything you need to know about stagflation. You’ll also discover tips on how to beat stagflation in 2024, and which assets to invest in (including fine wine.)

All About Stagflation and How It Affects Your Business or Investments

Stagflation usually occurs when there’s higher inflation and signs of stagnant economic growth. During this period, there’s high unemployment, rising prices, a supply shock, and low economic output.

Stagflation causes most companies to pay higher energy prices to manufacture goods and move them to stores. To cut costs and avoid paying higher wages, most companies lay off workers - which leads to a higher unemployment rate.

Meanwhile, soaring inflation and higher oil prices also cause customers to cut their costs - which hurts the overall economic growth.

So, how does stagflation affect you as an investor?

Because stagflation causes uncertainty in the global economy, it can also impact your investments.

For example, surging inflation reduces your total return on investments. If price inflation is at 8% and your returns are up by 4%, then your total returns are worth -4%.

Stagflation can also be a problem for the Federal Reserve Bank or any other central bank.

For example, the Federal Reserve Bank usually cuts the interest rate to adjust the money supply, reduce unemployment, and boost economic growth. However, changing the monetary policy during stagflation usually leads to surging inflation and the possibility of a recession.

As measured by the Consumer Price Index (CPI), the inflation rate peaked at 12.2% and the unemployment rate at 9% during the US recession in the 1970s. The Reserve Bank tried combating this by implementing higher interest rates, but this led to another recession.

Now, let’s check out how you can beat stagflation.

7 Effective Tips on How to Beat Stagflation in 2024

Here’s how you can tackle stagflation:

1. Diversify Your Investment Portfolio
2. Short Sell
3. Cut Operation Costs
4. Automate Business Processes
5. Evaluate Your Prices and Improve Product Quality 
6. Reduce or Eliminate Debt
7. Acquire Property, Assets, or Other Businesses

1. Diversify Your Investment Portfolio

To combat higher inflation, rising oil prices, and all the other effects of stagflation, investors usually resort to portfolio diversification.

So, if there are signs of stagflation in the world economy, it’d be worth adding profitable assets such as fine wine to your portfolio.

And if you don’t know where to start, visit the Vinovest website to discover how you can invest in fine wine bottles, easily.

Just be careful not to spend your last cent on risky investments such as growth stocks.

2. Short Sell

Some investors boost their returns by short selling during soaring inflation, stagflation, or when the pricing power of the dollar declines.

When you short sell, you invest in company stocks that are likely to drop in value. That way, you’ll only benefit when the stock declines in value. 

However, short selling could be risky and requires thorough research.

3. Cut Operation Costs

As a business owner, you can overcome inflationary pressure and stagflation by cutting operation costs.

For example, you could use less energy for business operations to combat the effects of high energy prices. You could also find out if you can get discounts on goods if you order in bulk.

When you slash unnecessary costs, you’re even likely to have the budget to pay your employees higher wages. That way, you won’t have to lay off staff to overcome stagflation risks.

4. Automate Business Processes

Automating your business activities can improve your company’s productivity and help you beat stagflation and rising inflation.

Ideally, you should invest in machinery or software that can automate simple, repetitive tasks. This will help produce products or services faster and streamline your business processes.

5. Evaluate Your Prices and Improve Product Quality 

Commodity prices are usually high during stagflation. However, most customers will usually pay higher prices for high-quality goods and services.

So, if you want to charge higher prices, you should also ensure that you produce the best goods and services. This means you might have to conduct research to find out how to improve product quality and stay ahead of your competitors.

6. Reduce or Eliminate Debt

One of the best ways to beat stagflation is by keeping your debt to a minimum.

It could be worth replacing debt that carries floating interest rates with one that has fixed interest rate payments. That way, your repayments won’t be affected by stagflation, inflation, or when Federal Reserve Bank (central bank) raises the interest rate.

7. Acquire Property, Assets, or Other Businesses

Stagflation and price inflation usually lead to the closure of most small and medium-sized companies. During this time, most businesses might consider selling property and equipment at lower prices to raise funds. 

If your business is one of the survivors, this is your chance to acquire new property and equipment. You could also consider merging or acquiring a competitor if this allows you to expand into new markets.

Now, let’s discover the assets worth investing in during stagflation periods. 

What Should I Invest in During Stagflation?

Here are the most profitable assets to add to your portfolio:

1. Collectibles Like Fine Wine
2. Commodities
3. Bonds and Credit
4. Real Estate

1. Collectibles Like Fine Wine

A collectible such as fine wine can be an excellent investment when stagflation risks are high. But that’s not all - fine wine is also a great investment when the pricing power of the dollar declines, during periods of rising inflation, or when the economic growth is stagnant.

This asset usually offers the best returns compared to stocks and other alternative investments. For example, fine wine yielded about 26% investment returns during the Great Recession in 2008, while stocks dropped by 52%.

Check out the Vinovest website to discover how you can buy, store, and sell fine wines from the United States, Italy, the United Kingdom, and all over the world.

2. Commodities

Commodity prices usually rise sharply during stagflation and high inflation periods. So, you could offset stagflation and inflationary pressure by investing in commodities such as oil and precious metals like gold.

3. Bonds and Credit

Investing in bonds and credit is a good way to protect your investment portfolio against stagflation, high inflation, a recession, and market volatility.

For example, floating-rate bonds adjust their interest rates with the change in the CPI (Consumer Price Index) - providing higher inflation protection.

4. Real Estate

Real estate usually performs better than most stocks during stagflation, periods of rising inflation, or when there are higher interest rates. That’s because house prices and rent payments tend to increase when the global economy undergoes difficulties.

Beat Stagflation By Investing in a Profitable Asset Like Fine Wine

During stagflation, the world economy becomes stagnant, and there’s high unemployment and low economic output.

Meanwhile, your investments can also be affected by the rising prices of commodities, stagflation, or any other economic downturn.

Now, whether you’re a business owner or an investor, you can beat stagflation with any of the tips we’ve covered. And if you’re into investing, remember that an asset like fine wine can do wonders for your portfolio.

Visit the Vinovest website today to buy, store, and sell the best wines from the United States, France, the United Kingdom, and worldwide.