Macro views

Navigating potential stagflation in uncertain markets

May 19, 2025 - 2 min read

Chief Executive Officer, Chief Investment Officer, and Portfolio Manager – Gateway Investment Advisers, LLC

Gateway market perspective

Market volatility experts from Gateway Investment Advisers, specialists in options-based investment strategies, examine key volatility trends each month and risk management ideas to help investors stay invested for the long run.

Navigating potential stagflation:

Uncertainty around the economic impacts of shifting US tariff policy has triggered concerns about stagflation, an economic environment with high inflation, low or declining economic growth, and elevated or rising unemployment.
A stagflationary environment is one with quarterly inflation greater than 2% plus quarterly and year-over-year Real GDP less than 2%.
Stagflation is concerning for investors because as inflation increases, the correlation between stocks and bonds tends to increase and diversification benefits wane.
Rising inflation can also trigger tightening monetary policy, which often results in rising interest rates that have the potential to negatively impact bonds (as rates rise, bond prices fall).
Given recent market turmoil, investors may be hesitant to increase equity exposure and unable to find the typical diversification benefits they seek in bonds.
However, higher interest rates and volatility are tailwinds for options-based strategies.
Key Takeaway: Gateway’s array of investment capabilities may help buffer stagflation by:
- Helping to reduce portfolio risk.
- Offering equity market loss mitigation.
- Increasing income through cash-flow generation while avoiding interest rate-sensitive or illiquid investments.

Gateway Market Perspective – Navigating potential stagflation

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