WHAT IS STAGFLATION?
Learn about the World Bank’s global economic outlook.
By HARRIET TORRY
Fri, Jun 17, 2022 3:23pm
3 min
3 min
Stagflation—a toxic cocktail of stagnating growth and rising prices—is generally viewed as a relic of the 1970s. But economists are warning it could make a comeback.
What is stagflation?
The term is broadly defined as sluggish growth tied with rising inflation. Economists haven’t given it much thought since the 1970s, when U.S. consumers lined up to fill their cars with high-price gasoline and the jobless rate hit 9%.
Earlier this week, the World Bank sharply lowered its growth forecast for the global economy this year and warned of several years of high inflation and tepid growth reminiscent of the stagflation of the 1970s.
Stagflation spells trouble for the economy. Rising inflation erodes consumer purchasing power, and weaker demand hurts companies’ profits and causes layoffs.
Stagflation also puts the Federal Reserve in a bind because the central bank’s job is to keep both inflation and unemployment low. The Fed can raise interest rates to curb inflation—a path it has started on and intends to continue this year—but if it moves too aggressively it risks strangling spending and tipping the economy into a recession.
Why is stagflation a risk now?
Inflation is close to a 40-year high, and economists are worried about economic growth because of the war in Ukraine as well as lockdowns in China and supply-chain disruptions related to the Covid-19 pandemic.
Are we in a period of stagflation now?
Not necessarily. Inflation is high, but unemployment remains near a half-century low. The U.S. economy contracted in the first quarter as supply disruptions weighed on output, but most economists expect growth will resume in the second quarter because of strength in consumer and business spending. Stagflation would be a sustained period of both higher inflation and slower growth, not just one quarter.
Stagflation remains a risk to the U.S. economy, and there are similarities between the situation in the 1970s and today. Surging prices for oil and food are pushing up the cost of living, and business executives are voicing concerns about the outlook for the economy.
But the key difference between the situation in the 1970s and today is employment. During the 1970s and early 1980s, the unemployment rate at times was around 10%. It was just 3.6% in May 2022. U.S. layoff announcements, for now, are few and far between.
What is the difference between stagflation and inflation?
Inflation refers to an increase in prices for goods and services. The Fed likes to see a bit of inflation. It targets 2% inflation a year, because that signals healthy demand in the economy. But if inflation rises too quickly, the rapid price increases erode households’ purchasing power. Stagflation is a situation in which prices are rising, but demand is weakening and economic growth is slowing or contracting. As a result, businesses make less money and cut jobs, driving up unemployment. At worst, that pushes the economy into a recession.
Has stagflation happened before?
Yes, stagflation occurred from the early 1970s to the early 1980s, when surging commodity prices and double-digit inflation collided with high unemployment.
British Parliamentarian Iain Macleod is credited with first using the word stagflation in 1965. “We now have the worst of both worlds—not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of ‘stagflation’ situation.”
Its seeds were planted in the late 1960s, when President Lyndon B. Johnson revved up growth with spending on the Vietnam War and his Great Society programs. Fed Chairman William McChesney Martin, meanwhile, failed to tighten monetary policy sufficiently to rein in that growth.
In the early 1970s, President Richard Nixon, with the acquiescence of Fed Chairman Arthur Burns, tried to tame inflation by imposing controls on wage and price increases. The job became harder in 1973 after the Arab oil embargo drastically drove up energy prices, and overall inflation. Mr. Burns persistently underestimated inflation pressure: In part, he didn’t realize that the economy’s potential growth rate had fallen and that an influx of young, inexperienced baby boomers into the workforce had made it harder to get unemployment down to early-1960s levels.
As a result, even when the Fed raised rates, pushing the economy into a severe recession in 1974-75, inflation and unemployment didn’t fall back to the levels of the previous decade.
The stagflation of the 1970s ended painfully. Fed Chairman Paul Volcker drastically boosted interest rates to 20% in 1981, triggering a recession and double-digit unemployment.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: June 14, 2022.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
MOST POPULAR
The Australian leather house has opened an immersive four-day pop-up in Manhattan, unveiling its Bloom Collection and redefining what a product launch can look like.
Following the successful launch of its Palais Collection, MAISON de SABRÉ has unveiled a new modular handbag system offering more than 720 styling combinations.
Gold miners are emerging as a compelling way to navigate market uncertainty, with analysts pointing to strong cash flows, attractive valuations and rising profit margins. As gold prices stabilize above US$4,000 an ounce, mining stocks could offer investors both downside protection and long-term upside.
By Paul R. La Monica
Thu, Aug 6, 2026 3 min
3 min
Gold is one of the market’s go-to hedges in rocky times. Don’t forget that gold miners’ stocks are too.
The stock market’s gains in 2026 belie the rocky macroeconomic picture: elevated inflation, heightened geopolitical tensions, and jitters about the artificial-intelligence trade. That backdrop, in theory, should be the time for gold to shine. Instead, the price of the yellow metal has tumbled more than 5% so far, after last year’s blistering 65% rally. In part, the U.S. dollar’s recovery has stymied gold, which benefited from the greenback’s weakness in 2025.
Even with the precious metal’s recent weakness, gold mining stocks could be the best way to profit from this year’s uncertainty.
Gold miners “are a valuable hedge against macro risks that would likely be damaging for equities,” BCA Research’s Noah Weisberger and Rishabh Shah wrote this week.
Concerns about the Federal Reserve’s next moves to tackle inflation, the increasingly crowded AI trade, and steep valuations for tech stocks are just some of the drivers that could help gold’s price get on even footing— and lead to even bigger gains for miner stocks.
These stocks’ prices tend to outpace gold’s moves, because the companies have fixed operational costs. So when gold’s price rallies, their profit margins soar, and vice versa. For instance, the VanEck Gold Miners GDX +7.39% exchange-traded fund has fallen 11% this year as the metal has slumped.
Now, gold’s price just needs to stabilize to help miners’ stocks take off, and that seems to be happening. The precious metal has recently found support above the $4,000 level, and has stuck in a narrow range since the end of June. But its price rose ever so slightly in July, ending a four-month losing streak for the metal. Technical analysis also suggests that gold is due for a comeback.
Barron’s recently wrote that the pullbacks for both gold miners and the metal itself are overdone. Senior technical analyst Doug Busch noted that the VanEck ETF is on the “verge of a breakout” and has the potential to hit $11o in early 2027, up more than 40% from its current price.
Gold miners also have more than their role as a market hedge going for them. Their fundamentals are solid, too, says Chris Mancini, portfolio co-manager of the Gabelli Gold Fund.
“Precious metals miners are generating substantial amounts of free cash flow given profit margins of over $2,000 per ounce, and are returning this cash to shareholders through buybacks and dividends,” he said in an email.
“Buying the miners is a cheap way to get exposure to the price of gold,” he added. His fund owns Newmont NEM +6.71%, a Barron’s stock pick last year, and Agnico Eagle Mines as top holdings, as well as miners Northern Star Resources, Endeavour Mining, and Kinross Gold K+8.59%.
Miners are better businesses than they used to be, the BCA team added.
“Capex is more disciplined, margins are high and rising…and they are largely independent of the AI story,” Weisberger, BCA’s head of equities, and Shah, a senior analyst, wrote.
That last part is key. AI is disrupting the software industry and many other services and information-oriented businesses, and investors have piled into AI stocks. But ChatGPT, Claude, Grok, and other large-language models aren’t going to replace the need to mine for metals.
“Equity portfolios can benefit from exposure to quality that is uncorrelated to AI risk, and gold miners fit the bill,” the BCA team said.
They recommend that investors buy the VanEck Gold Miners ETF, which owns top miners such as Agnico, Barrick Mining ABX +7.24%, and Newmont.
An important bonus for big gold miners’ stocks is that their valuations are attractive after the gold’s pullback, too. The VanEck ETF is now trading at just a little more than nine times next year’s earnings estimates. That’s a big discount to its five-year average price-to-earnings ratio of 14, according to FactSet.
What’s more, the ETF is currently valued at a more than 50% discount to the S&P 500 SPX -0.17%, which is trading for about 19 times earnings estimates for 2027. Mining stocks have typically traded at just a 25% discount to the broader market over the past five years. So there is significant upside for the group if valuations move back toward normal levels.
One factor that complicates mining stocks as a market hedge, of course, is if stocks bounce back, which has been the case so far in August.
But both the market and economic outlooks remain cloudy, and investors remain nervous about the Fed’s next moves and AI stocks. Gold miners should do just fine, even if the anxious mood on Wall Street persists.
