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RVK analyzes investment strategies for navigating stagflationary environments marked by stagnant growth, persistent inflation, and rising unemployment. Drawing from the 1973-1981 period when oil shocks created prolonged economic malaise, the analysis shows both equities and fixed income underperformed during stagflation as inflation eroded purchasing power while weak growth pressured earnings and valuations. Traditional monetary policy creates dilemmas since raising rates to combat inflation worsens unemployment while stimulus fuels more inflation. The report identifies potentially beneficial asset classes including precious metals like gold which served as reliable stores of value, commodities providing direct inflation protection especially energy and agriculture, Treasury Inflation-Protected Securities offering government-backed real return preservation, and floating rate debt benefiting from rising reference rates. Defensive equity sectors like consumer staples, utilities, and healthcare may outperform due to pricing power and inelastic demand. Infrastructure and certain hedge fund strategies also offer inflation protection through contractual adjustments and macroeconomic trend exploitation. The conclusion emphasizes building diversified frameworks rather than optimizing for single economic regimes.
In a stagflationary environment characterized by stagnant real growth, persistent inflation above targets, and rising unemployment, traditional asset classes face simultaneous pressure, requiring investors to emphasize alternative assets like precious metals, commodities, inflation-protected securities, and floating rate debt that can provide protection against both inflation erosion and economic stagnation.
The economic regime of constrained growth, stubborn inflation, and rising unemployment poses unique challenges requiring diversified approaches beyond traditional asset allocation frameworks.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 18 2026 | 2025 Q4 | - | commodities, gold, healthcare, inflation, Stagflation, TIPS, Utilities | - | Persistent inflation above targets poses challenges for multiple asset classes by eroding purchasing power while stagnant growth suppresses demand and earnings. Traditional monetary tools create policy dilemmas as raising rates to combat inflation can worsen unemployment while stimulus can fuel more inflation. Gold has historically been one of the most reliable assets during stagflationary conditions as a tangible, finite resource with intrinsic value not tied to any single economy or currency. During 1970s stagflation gold prices soared, and in 2025 gold continued serving as a store of value amid economic uncertainty. Commodities provide the most direct protection against inflation, with energy and agriculture particularly beneficial during inflationary periods. Energy prices tend to rise when supply is constrained, while food prices often increase during inflationary periods regardless of the underlying drivers. Most private credit is floating rate in nature and may behave similarly to other floating rate debt during stagflation. While less tested in prior environments and subject to credit risk, private credit could benefit from rising reference rates as central banks fight inflation. |
| Sep 30 2025 | 2025 Q3 | - | diversification, earnings, inflation, Macro, rates | - | The capital markets review highlights a supportive but complex macro backdrop driven by Fed rate cuts, resilient earnings, and easing trade tensions. Slowing labor markets and above-target inflation coexist with stable growth expectations, creating crosscurrents across equities, fixed income, and real assets. Macro diversification across regions, styles, and asset classes is emphasized as dispersion increases late in the cycle. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
CommoditiesBull market may be in early stages with most commodities 46% below nominal peaks and 73% below inflation-adjusted highs. Commodity-to-equity ratio near historic lows suggests capital starvation. Current cycle appears only one-third complete compared to historical precedent. |
Cycles Capital Valuation Equities |
GoldGold returned +65% in dollars in 2025, driven by broadening demand from central banks, professional and retail investors. Central banks now hold 24% of reserves in gold versus 23% in US Treasuries for the first time. Maintained 12% portfolio allocation throughout the year. |
Central Banks Reserves Diversification Demand | |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through | |
Private CreditThe space has become very popular with lots of LP money chasing returns. Some sponsors have paid extremely high prices and lent on unfavorable terms. Many have also lent into the AI/data-center space to businesses with questionable futures. |
Credit Lending Risk | |
| 2025 Q3 |
Macro |
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