Investors Flock to Gold and Bonds as Dollar Braces for Double Stagflation Threat in 2025

• Why Are Investors So Worried About Stagflation in 2025?
• How Is Stagflation Reshaping Bond Markets?
• Could U.S. Stagflation Trigger a Global Stock Market Slide?
• Why Is the Dollar Getting Squeezed From Both Sides?
• Where Are the Smart Money Hiding?
• FAQ: Your Stagflation Questions Answered

Stagflation fears are gripping global markets in 2025, with 70% of investors bracing for below-trend growth and stubborn inflation. The U.S. dollar faces a dual threat—slower growth eroding its value and inflation diminishing its purchasing power. Gold and bonds emerge as safe havens, while equities hover NEAR record highs despite looming risks. This article unpacks the stagflation dilemma, its impact on currencies, and where smart money is flowing.

Why Are Investors So Worried About Stagflation in 2025?

Let’s cut to the chase: stagflation is the economic bogeyman keeping portfolio managers awake at night. A BofA Global Research poll from early August 2025 revealed that a staggering 70% of investors expect the worst of both worlds—sluggish growth paired with persistent inflation. The U.S. labor market’s recent stumbles, coupled with unexpected spikes in Core inflation and producer prices, have turned these fears into a full-blown market narrative. Yet here’s the irony—while everyone’s talking about stagflation, few are pricing it in. As Carmignac’s Marie-Anne Allier bluntly put it, “Stagflation is in the mind of the market, but not the price.”

How Is Stagflation Reshaping Bond Markets?

Bonds, traditionally the “safe” part of portfolios, are caught in the crossfire. Here’s why: when inflation sticks around like an unwanted houseguest, those fixed coupon payments lose real value over time. Paul Eitelman from Russell Investments (yes, the $1 trillion asset manager) notes that pensions and insurers are sweating bullets over their bond holdings. And it’s not just a U.S. problem—Mayank Markanday at Foresight Group points out that G7 bond markets MOVE in eerie sync. When U.S. 30-year yields sneeze, Germany and Britain catch a cold. Case in point: 2025 has already seen long-dated bonds sell off globally, with short-term yields falling while long-term ones creep up.

Could U.S. Stagflation Trigger a Global Stock Market Slide?

Fidelity International’s Caroline Shaw isn’t waiting to find out—she’s already buying put options on the Russell 2000 as a hedge. History isn’t comforting either: State Street’s Michael Metcalfe crunched the numbers and found that since 1990, global stocks (.MIWD00000PUS) dropped 15% on average when U.S. manufacturing showed contraction plus high prices. Yet here we are in 2025, with tech stocks mooning like it’s 2021 all over again. As Man Group’s Kristina Hooper quipped, markets are like proud parents—they only see what they want to see in their darling tech stocks.

Why Is the Dollar Getting Squeezed From Both Sides?

Stagflation hits currencies with a one-two punch: slower growth weakens demand for dollars, while inflation erodes what those dollars can actually buy abroad. The numbers don’t lie—the euro’s up 12% against the dollar this year, with the yen and pound joining the rally. Edmond de Rothschild’s Nabil Milali sees more pain ahead for the greenback, especially against the euro. It’s enough to make any forex trader reach for the antacids.

Where Are the Smart Money Hiding?

Gold’s glittering again (surprise, surprise), but the real action might be in inflation-linked bonds and swaps. Foresight Group’s Markanday favors short-dated linkers, while Eitelman notes inflation swaps are heating up—the U.S. two-year swap rate is near multi-year highs. At BTCC, our analysts are seeing crypto investors use bitcoin as a non-correlated hedge, though that’s a story for another day.

FAQ: Your Stagflation Questions Answered

What exactly is stagflation?

Stagflation occurs when an economy experiences stagnant growth combined with high inflation—a nasty combo that makes traditional policy tools less effective.

How long could this stagflation period last?

While crystal balls are notoriously unreliable, the current consensus suggests these conditions may persist through at least Q1 2026 unless productivity improves dramatically.

Are cryptocurrencies a good stagflation hedge?

Some investors are allocating to crypto, particularly Bitcoin, as a potential store of value. However, the BTCC research team cautions that crypto remains highly volatile compared to traditional hedges like gold.