Since the post-COVID economic rebound began, investors have faced a formidable adversary: inflation.

Inflation, the relentless rise in prices of goods and services, can erode purchasing power and destabilize financial markets. Yet, in recent times, a more ominous threat has emerged: stagflation.

A string of inflation reports during the first three months of 2024 all came in above estimates, fueling fears that inflation could prove more difficult to conquer than previously believed. On top of that, economic growth during the first quarter unexpectedly faltered, rising at an annualized pace of just 1.6% – the slowest rate since 2022. However, the latest is a little more promising.

Recent comments by U.S. Federal Reserve Chair Jerome Powell indicating continued elevated inflation, uncertainty about reaching inflation targets, and the Fed’s readiness to respond to labour market weakness have sparked concerns about the possibility of stagflation.¹ Coupled with lower-than-expected economic growth, some market watchers believe we could be approaching 1970s-style stagflation

The economic paradox of stagflation—stagnant economic growth coupled with soaring inflation—presents unique challenges for investors seeking to protect their wealth. So, let’s look at the nature of stagflation, its historical precedents, and the perils it poses to the economy to help formulate effective strategies to safeguard your finances.

Understanding Stagflation

Stagflation, a combination of “stagnation” and “inflation,” seems like a contradiction in terms.

Unlike conventional inflationary periods, where robust economic growth typically accompanies rising prices, stagflation is a rare occurrence in which stagnant growth coincides with escalating inflation, creating a double whammy for consumers and investors alike.

Picture this: sluggish job growth, tepid consumer spending, and yet, prices soaring relentlessly. It poses vexing dilemmas for policymakers and investors alike, since adjusting one factor can negatively impact the others, making the entire situation worse.³

Lessons from the Past

Stagflation isn’t a new nemesis. First defined in the U.K. in the 1960s, it wasn’t until the 1970s that the impacts of stagflation on a developed economy were truly felt.

The 1970s were a tumultuous decade, marred by geopolitical turmoil and oil shocks. The United States, in particular, grappled with the fallout from the OPEC oil embargo, which triggered a spike in energy prices. Coupled with expansionary fiscal policies and wage-price spirals, inflation escalated out of control, reaching double-digit levels. Simultaneously, economic growth stagnated, leading to widespread unemployment and economic malaise in 1974 and 1975 and again between 1978 and 1982.⁴

Globally, other countries have been mired in periods of stagflation, with Japan being the most famous (or infamous) example.

Between 1991 and 2001, Japan experienced a ‘Lost Decade’ of stagflation as Japan’s once-booming economy fell victim to both tight credit and a liquidity trap. While Japan eventually pulled itself out of this period, its recovery was notably slower than other major economies that have dealt with stagflation, and the effects of this period continue to echo in the Japanese economy today.⁵

The lesson of history, unfortunately, is that there’s no easy way out of stagflation. Raising or lowering interest rates has been the primary way to reduce inflation, while higher government spending has been the classical means of getting an economy out of recession. However, monetary policy alone can’t solve both inflation and recession at the same time. The only real solution is supply-side policies that increase productivity, resulting in higher growth that is unencumbered by inflation.⁶

The Perils of Persistent Inflation

But what if an economy is unable to avoid stagflation? What are the ramifications of persistently high inflation? Persistent inflation actually poses a variety of threats to the economy, jeopardizing purchasing power, eroding savings, and fostering overall economic uncertainty.

As prices climb, consumers grapple with reduced discretionary income and the diminished affordability of goods and services—a phenomenon particularly burdensome for low-income households.⁷

Moreover, inflationary pressures can spook financial markets, triggering volatility, undermining investor confidence, and exerting a drag on economic growth. Should our economy slip into stagflation this year, some analysts predict as much as a 20% decline in the S&P 500, as a result.⁸

Investment Strategies for Inflationary Times

So, in the face of stagflation and persistently high inflation, how can investors position themselves to weather the potential turbulence? Here are a few ideas:

  • High-Interest Savings Accounts (HISA): In an inflationary environment, opting for high-interest savings accounts can provide a shield against the adverse effects of inflation, offering competitive yields while preserving liquidity. With funds in a HISA investment, you gain access to high-interest deposit accounts with major banks that offer higher rates of return than any savings vehicle besides government bonds and Treasury bills.⁹ Depending on the make-up of your HISA investment, interest accrued each month can be paid out either as additional units of the fund or as cash distributions.
  • Cash management solutions: Harness the power of cash management solutions offered by reputable financial institutions to optimize your cash holdings. These solutions often provide a suite of features, including enhanced yield potential, flexible liquidity options, and risk mitigation measures, ensuring your cash reserves remain resilient in the face of inflationary headwinds.
  • Bonds: Consider allocating a portion of your investment portfolio to inflation-protected securities such as bonds. These instruments offer built-in inflation safeguards, providing investors with a hedge against purchasing power erosion while potentially generating attractive monthly income and long-term capital appreciation. For investors focused on managing risk, bonds offer various options, from high-yield bonds offering greater returns (albeit at higher risk) to government and municipal bonds known for their stability.10

Investing in HISA, MCAD and BOND ETFs

If you’re looking for ways to protect your money in inflationary times while maximizing your monthly income, consider your options in ETFs.

Evolve’s suite of cash solutions include the High Interest Savings Account Fund (HISA ETF) and US High Interest Savings Account Fund (HISU.U ETF). Both ETFs invest primarily in high-interest deposit accounts, exclusively with some of Canada’s ‘big six’ banks. With cash an important component of a well-diversified portfolio, the HISA ETF (in Canadian dollars) and HISU.U ETF (in U.S. dollars) help you preserve capital during market uncertainty until the time is right to invest your money elsewhere.

For more information on the Evolve High Interest Savings Account Fund (HISA ETF), explore fund details here. For more information on the Evolve US High Interest Savings Account Fund (HISU.U ETF), explore fund details here.

Evolve’s cash solutions also include our Premium Cash Management Fund (MCAD ETF) and US Premium Cash Management Fund (MUSD ETF). Both funds aim to optimize yield while maintaining the liquidity of your cash. MCAD preserves your capital and provides monthly income by investing in Canadian dollar-denominated money market instruments, while MUSD does the same but by investing in US dollar-denominated money market instruments.

For more information on the Premium Cash Management Fund (MCAD ETF), explore fund details here. For more information on the US Premium Cash Management Fund (MUSD ETF), explore fund details here.

Evolve Enhanced Yield Bond Fund (BOND ETF) provides investors with a low-cost fixed-income solution that seeks to deliver attractive monthly income and long-term capital appreciation. To enhance yield, mitigate risk, and reduce volatility, BOND will initially employ an active covered call option writing program on 50% of the portfolio.

For more information on Evolve Enhanced Yield Bond Fund (BOND ETF), explore fund details here.



  1. “Fed’s warning stirs stagflation concerns,” The Globe and Mail, May 3, 2024;
  2. Wang, I., “The economy could be heading toward 1970s-style stagflation. What it means for the stock market,” MarketWatch, May 13, 2024;
  3. “What Is Stagflation, What Causes It, and Why Is It Bad?,” Investopedia, October 30, 2023;
  4. Probasco, J., “Stagflation: When a stalling economy, high inflation, and rising unemployment all collide,” Fortune, December 28, 2022;
  5. Nielsen, B., “The Lost Decade: Lessons From Japan’s Real Estate Crisis,” Investopedia, January 14, 2023;
  6. Pettinger, T., “Solution to Stagflation,” Economics Help, April 17, 2017;
  7. Floyd, D., “10 Common Effects of Inflation,” Investopedia, December 13, 2023;
  8. Wang, I., “The economy could be heading toward 1970s-style stagflation. What it means for the stock market,” MarketWatch, May 13, 2024;
  9. Carrick, R., “Rob Carrick: Answers to your questions about the low-risk ETF paying almost 5%,” The Globe & Mail, March 10, 2023;
  10. “Investor Bulletin: Municipal Bonds – Asset Allocation, Diversification, and Risk,” U.S. Securities and Exchange Commission, February 1, 2018;

Header Image Source: Getty Images Credit: twomeows

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