What ‘stagflation’ could mean for your money
New economic risks are causing some experts to warn of stagflation, the combination of low economic growth and high inflation.
The fact that inflation was above the Fed target and the slowdown in the employment market had already caused concerns. Then rising oil prices due to the war in Iran led to comparisons with oil supply shocks that led to shortages and long gas queues that Americans saw during the stagflation of the 1970s.
But some economists say full-blown stagflation, sometimes called the worst-case scenario for the U.S. economy, may not emerge as strongly as it did then.
“If there is a recession and inflation rises, then there is the potential for short-term stagflation, which means low, below potential growth rate and higher inflation, but nothing close to what happened in the 70s and early 80s,” said Eugenio Aleman, chief economist at financial firm Raymond James.
Raymond James’ forecast puts the chance of a U.S. recession at only 35% to 40%.
Measuring stagflation risks
The term stagflation will probably continue to come up, Amid high oil prices and weak employment data, Aleman wrote in a recent economic analysis.
“People have been talking about stagflation for three, four years, and we’ve always maintained that stagflation doesn’t exist,” Aleman told CNBC.com.
Aleman said the risk of stagflation is “very low.”
Whether stagflation occurs or not will depend on how the situation develops. The U.S. economy is experiencing a shock in the wake of the Iran conflict, which is now leading to rising inflation and contracting output, according to Gregory Daco, chief economist at strategy consulting firm EY-Parthenon and president of the National Association for Business Economics.
This shock will likely lead to higher inflation, Daco said. The problem, he said, was the duration.
“If there is a severe and prolonged shock, then yes, there is definitely a risk of entering a stagflation environment,” Daco said.
Consumers face ‘real headwinds’
A customer shops at a grocery store in Miami, Florida, on March 11, 2026.
Joe Raedle | Getty Images
The conflict in Iran has erased the improvement in consumer confidence since February. March data from the University of Michigan Consumer Survey, which measures how households feel about their financial health and the economy.
“U.S. consumers face some headwinds, although it is difficult to know the duration and impact of the war here,” said Mark Hamrick, senior economic analyst at Bankrate.
“Inflation is likely to be higher in the medium term,” he said.
“In terms of trying to bulletproof one’s finances against high prices, having adequate liquidity or emergency savings is critical,” Hamrick said.
Less than half of Americans (47%) have enough money to cover an unexpected $1,000 expense. Bank rate found In a survey conducted in December. Additionally, 29% of individuals surveyed said they have more credit card debt than emergency savings.
Well-qualified borrowers face annual credit card interest rates of about 20%, Hamrick said. For others, carrying scales can be even more expensive.
“Credit is not a long-term solution to illiquidity,” Hamrick said. “This is a short-term tool that is costly.”
According to Hamrick, there are several positive factors that can help ease consumers’ budgets. Average tax refunds are expected to increase this filing season following changes to President Donald Trump’s new “big beautiful” law. He said average hourly earnings were also above inflation in the last employment report.
How can you prepare your portfolio?
Ksenia Ovchinnikova | An | Getty Images
Even if there are no clear signs of stagflation, the market remains volatile as investors digest relevant news such as employment figures and higher oil prices.
Certified financial planner Tom Geoghegan, founder of Beacon Hill Private Wealth in Summit, New Jersey, said he works with clients to make sure their portfolios, cash reserves and spending plans can withstand unexpected market or economic changes.
For cash reserves or financial goals within a few years, such as those in retirement or nearing retirement, an FDIC-protected high-yield savings account can provide ready access to that money, Geoghegan said.
“We don’t want to be in a situation where we sell when the portfolio is down,” he said.
For portfolio investments, Geoghegan said he emphasizes diversification in case of stagflation or other events that could affect markets.
Instead of focusing primarily on large-cap companies, Geoghegan said he encourages clients to have globally diversified portfolios to better weather stagflation or other potential shocks to the stock market.
Supplementing your portfolio with other investments, such as government bonds or certificates of deposit, can help ensure stability, according to Geoghegan. The Treasury said inflation-protected securities, or TIPS, may also offer inflation protection; The principal of these bonds increases as inflation increases.
“The goal is not to position a portfolio based on a single economic outcome, but to avoid over-reliance on a single scenario,” Geoghegan said.
