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History Shows These 2 Overlooked Assets Are the Best Shield Against 1970s-Style Stagflation

Stagflation. Just saying the word can make experienced investors tense. Anyone who lived through the 1970s—or spent time studying that turbulent decade—knows how brutal it was to face soaring inflation and zero economic growth at the same time. Central banks found themselves stuck, and both stocks and bonds took a hit. Yet, despite this history, most investors still cling to the usual “diversified” portfolios, hoping the past won’t repeat itself.

But if you dig a little deeper into the data, two asset classes quietly stood out as the real heroes during that difficult period. They’re not the usual go-to picks. I’m talking about broad commodities (not just gold) and tangible real assets like farmland and timberland. These have quietly protected portfolios in ways traditional stocks and bonds just can’t match.

The Power of Commodities Beyond Gold

When inflation looms, most investors immediately grab for gold. And sure, gold gets a lot of attention—but it’s just one piece of the puzzle. The broader commodity market, including energy, industrial metals, and agriculture, was actually the only major asset class that delivered real returns during the 1970s. For example, between 1972 and 1981, the S&P GSCI Commodity Index grew over 21% annually. Even after adjusting for inflation, that meant double-digit returns for investors.

Why do commodities shine during inflationary times? It’s straightforward. When prices for everyday goods and services go up, producers of those goods—think oil, wheat, copper—benefit because their profit margins expand while other sectors struggle. I’ve seen many institutional investors, who usually steer clear of “volatile” commodity markets, reconsider when inflation starts to heat up. It’s not a silver bullet—commodity prices can swing wildly—but over longer inflationary cycles, they’ve been a crucial buffer.

Real Assets: Farmland and Timberland

Next up are real assets, especially farmland and timberland. These aren’t easy investments—illiquid, harder to access, and they require more hands-on management than just clicking “buy” on an ETF. But the numbers don’t lie. Farmland, for instance, beat inflation in the ‘70s and keeps showing resilience today. Land is unique because it’s productive and finite. As crop yields and timber harvests rise with inflation, the value of the underlying land often appreciates too.

I’ve noticed large endowments and sovereign wealth funds quietly increasing their stakes in these assets over the past decade. They’re not chasing quick returns—they’re after stability. Timberland, in particular, has a very low correlation with stocks and bonds. After all, trees keep growing no matter the economic climate. Plus, these assets tend to be less volatile than commodities while still offering solid inflation protection.

What Didn’t Work Then (and Still Struggles Today)

It’s easy to dismiss these as niche options, but consider what struggled during stagflation. Stocks and bonds both took a beating. The inflation-adjusted S&P 500 lost value in the ‘70s, and bonds fared even worse. The popular “60/40” portfolio—stocks and bonds combined—actually underperformed cash. Residential real estate had a mixed bag, with soaring mortgage rates making leverage a risk rather than a reward.

And what about TIPS (Treasury Inflation-Protected Securities)? They weren’t around back then, and while they offer some inflation protection today, they’re still government bonds at their core. If real interest rates spike or stagflation deepens, even TIPS can fall short.

What to Keep in Mind Before Jumping In

Now, I’m not saying commodities and real assets are flawless. Commodities can be extremely volatile and get hammered by short-term supply-demand shocks. Remember the oil glut of the 1980s? Returns were negative for years, and investors who jumped in late often got burned.

Farmland and timberland come with their own hurdles. They’re illiquid, so selling quickly is tough. Plus, managing these assets requires specialized knowledge—whether it’s about local markets, operational details, or navigating regulations. Most individual investors get exposure through funds, which adds layers of fees and complexity.

But here’s the key: no other asset class has consistently protected portfolios from the heavy blow of inflation combined with stagnant growth. Crypto is still too new and wild. Private equity’s role in inflation protection is uncertain. Even REITs can struggle if borrowing costs climb and tenants fall behind on rent.

Why Aren’t More Investors Jumping on This?

It boils down to habit and access. The investment world moves slowly, and many advisors stick to familiar ground. For individual investors, high minimums and unfamiliar risks are big barriers. That said, things are starting to shift. More ETFs and private funds now offer ways to tap into these markets, but it’s important to be aware of the trade-offs.

How to Start Protecting Your Portfolio

If you think the future might look more like the 1970s than the 2010s, these are the places to start. Dip your toes in with a broad commodity ETF or a fund that includes a mix of farmland and timberland. Watch how they react during inflationary spikes and how they fit alongside your other investments. Just remember: it won’t always be smooth sailing. There will be rough patches where these assets lag.

But if there’s one thing history teaches us, it’s this: when stagflation hits, these overlooked asset classes offer the only real shield most investors have. Relying on hope? That’s just not enough.

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