The latest inflation report came in hotter than expected, spelling bad news for retirees and those nearing retirement. With inflation refusing to cool, interest rates are likely to remain elevated for much longer. The threat of stagflation—a toxic mix of stagnant growth and rising prices—is becoming more real by the day. Rebecca Patterson, Bridgewater Associates former chief investment strategist, called stagflation, "the biggest risk for the market."1
Inflation Stubbornly Lingers
Headline inflation has now climbed to 3%, an annualized rate exceeding 6%, showing a troubling trend in the wrong direction. Far from reaching the Federal Reserve’s 2% target, inflation appears to be moving away from it. Core CPI, which excludes volatile food and energy prices, also ticked up unexpectedly to 3.3%. Showing persistent price pressures across the economy.2
The Federal Reserve's favorite inflation measure is the Personal Consumption Expenditures (PCE) price index. It also went up. Reinforcing the reality that inflation isn’t going away anytime soon.
Tariffs, Economic Uncertainty, and Market Jitters
Potential tariffs are adding another layer of complexity. Markets are bracing for them to fuel more inflationary pressures. Meanwhile, the on-again, off-again tariff policies are creating uncertainty. Throwing a wrench in business plans and making long-term investments riskier. Uncertainty about trade policy creates yet another headwind against growth. These forces are tightening a noose on the economy and pushing us to the brink of recession.
The Fed Turns Up the Pressure
Quite simply, with inflation still high, the Federal Reserve must keep interest rates elevated. Possibly for much longer than expected. And the longer it takes to rein in inflation, the more the Fed will need to tighten, making a recession increasingly likely.
Economists are warning that the economy can't keep up its current pace of growth forever. History shows that recessions almost always follow aggressive rate hike cycles. And this recent cycle has been the most severe since the 1980s. Today's rate hikes are more aggressive than the ones that helped collapse the housing market and start the Great Recession.
Soft landings after such rapid rate hikes are rare. And now recession warning signs are flashing. The New York Fed’s Recession Probability model is a pretty reliable indicator. When it starts dropping, that usually means a recession has already begun. And over the past year, it’s been on a downward trend. Fueling concerns that we’re already in one.
Stagflation: The Nightmare of the 1970s Returns?
If the economy slows while inflation remains high, the result could be stagflation. Last seen in the 1970s, rapid money supply expansion and energy crises led to years of stagnation and high prices. Today, the Federal Reserve faces a nearly impossible task. They need to boost the economy to avoid a recession. At the same time, they must keep inflation in check. Historically, the Fed has swung back and forth between rate hikes and cuts. Creating very volatile markets in the process.
The consequences of stagflation were devastating in the 1970s. From the end of 1972 to the end of 1978, the S&P 500 lost a third of its value in terms of real purchasing power. With inflation limiting the Fed’s ability to provide economic stimulus, stagflation could bring similar losses to today’s investors. Particularly to those who can least afford them, retirees and those nearing retirement.3
Government Spending and Debt Add to the Risk
A big reason for today’s inflation is the massive government stimulus from the pandemic. The U.S. debt has now soared past $36.5 trillion, with a record $840 billion budget deficit in just the last four months. That has a lot of people worried about how long we can keep this up.4
Spending cuts may be necessary to control the deficit. But they could also deepen the coming recession by causing more layoffs and a broader economic slowdown. Government spending is one of the pillars holding up the economy. Chipping away at it could speed up the downturn.
Stagflation & Gold
One of the biggest winners during the stagflation era of the 1970s was gold. Before 1974, gold was illegal to own as an investment. Its value remained nearly unchanged from 1932 to 1972. But once it became available to investors, it soared in value, providing a safe haven during turbulent economic times.5
Today, gold is once again approaching record highs, nearing $3,000 an ounce. Over the past decade, gold has risen 140%, and over the past 20 years, it has surged more than 500%. Even when adjusted for inflation, gold today is more expensive per ounce than at any time since the 1920s. With U.S. inflation expectations on the rise, gold and silver have been among the top-performing assets in the past year.6
A Gold IRA: Protecting Retirement Savings
Stagflation looks increasingly likely. If you are retired, or close to it, you might not have the luxury to wait decades for your funds to recover. In that case, consider diversifying with gold. A Gold IRA allows investors to hold physical gold and silver within their retirement accounts. Thereby protecting their savings from the impact of stagflation.
As markets continue to rise on a FOMO-driven feedback loop, valuations are straying further from reality. But as the recent plunge shows, investor confidence can evaporate in an instant. If stagflation takes hold, those who haven't prepared could see their savings decimated.
The warning signs are clear. The time to act is now. To learn how, call American Hartford Gold at 800-462-0071 today.
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Max Baecker is the President of American Hartford Gold (AHG), the nation’s largest retailer of precious metals. He leads American Hartford Gold’s mission to help clients achieve long-term financial security with physical gold and silver.
Under his guidance, American Hartford Gold has delivered billions of dollars’ worth of precious metals to thousands of satisfied clients.
Max's dedication to upholding American Hartford Gold's industry-leading standards is reflected in its accolades. American Hartford Gold has made numerous high-ranking appearances on the prestigious Inc. 5000 List of America’s Fastest-Growing Private Companies. AHG holds an A+ Rating from the BBB and a 5-Star Rating on Trustpilot from thousands of American Hartford Gold reviews. American Hartford Gold is the only precious metals company trusted and recommended by Bill O’Reilly.
AHG offers investment-grade gold and silver coins and bars at competitive prices. Clients also benefit from its buy-back commitment with no back-end fees. To learn more, visit American Hartford Gold.
Notes:
1. https://www.bloomberg.com/news/videos/2025-02-11/stagflation-is-biggest-market-risk-rebecca-patterson
2. https://seekingalpha.com/article/4758093-tgrowing-risk-of-stagflation-bodes-well-for-gold-and-silver
3. https://www.marketwatch.com/story/stagflation-could-be-a-disaster-for-your-401-k-e4768650
4. https://seekingalpha.com/article/4758093-tgrowing-risk-of-stagflation-bodes-well-for-gold-and-silver
5. https://www.marketwatch.com/story/stagflation-could-be-a-disaster-for-your-401-k-e4768650
6. https://www.marketwatch.com/story/stagflation-could-be-a-disaster-for-your-401-k-e4768650
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