During a recent appearance at the Economic Club of New York, JPMorgan Chase (JPM Quick QuoteJPM - Free Report) CEO Jamie Dimon expressed concerns that the U.S. economy could witness challenges similar to those of the 1970s. He indicated the likely resurgence of stagflation — a condition characterized by low growth combined with high inflation — which could complicate inflationary risks currently being faced by the U.S. economy, as quoted on a Yahoo Finance article.

The current inflation readings indicate that the previous Fed rate hikes were not sufficient enough to contain inflation right now. The effect of the tight monetary policy is yet to trickle in fully on the economic level and exhibit the full effect. Recent comments from Fed officials, including Chair Jerome Powell, have supported Dimon’s cautious outlook.

Over the past week, Fed officials have adjusted their stance, moving away from prior comments about potential rate cuts to indications that interest rates may remain higher for longer to combat sticky inflation. Meanwhile, higher-for-longer rates are likely to result in an economic slowdown.

The Conference Board recently said that while they do not forecast a recession in 2024, we expect consumer spending growth to slow down and for overall GDP growth to cool to under 1% over Q2 and Q3 of 2024. Thereafter, it is expected that inflation and interest rates will normalize, and the quarterly annualized GDP growth is projected to meet its potential, which is close to 2%, by 2025.

Flattening Yield Curve Negative for Banks

The spread between 10-year and two-year U.S. treasury yields have been negative, which indicates a flattening of the yield curve. Incidentally, JPMorgan faced its first sequential drop in net interest income in nearly three years, attributed to decreasing deposit margins and lower deposit balances. This suggests that along with regional banks, even big U.S. banks are feeling the pressure from the current interest rate environment.

Other Factors That Act as Headwinds

Dimon is concerned about excessive government spending. Ongoing conflicts in the Middle East and East Europe also pose threats to commodity markets and geopolitical stability.

Inflation-Beating ETFs to Play

Against this backdrop, below we highlight a few ETFs that could safeguard your portfolio amid a likely stagflation.

Amplify Inflation Fighter ETF (IWIN Quick QuoteIWIN - Free Report)

IWIN is an actively-managed ETF, investing in asset classes that look to benefit, either directly or indirectly, from inflation. IWIN intends to provide investors with long-term capital appreciation in inflation-adjusted terms. The expense ratio of IWIN is 0.92% and the yield is 4.07% annually.

AXS Astoria Inflation Sensitive ETF (PPI Quick QuotePPI - Free Report)

AXS Astoria Inflation Sensitive ETF is an actively managed, broadly diversified ETF that seeks long-term capital appreciation in inflation-adjusted returns. The fund has exposure to cyclical stocks (such as natural resources, energy, industrials and materials), commodities and TIPS. The fund charges 76 bps in fees and yields 1.98% annually.

Fidelity Stocks For Inflation ETF (FCPI Quick QuoteFCPI - Free Report)

The underlying Fidelity Stocks for Inflation Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies with attractive valuations, high-quality profiles and positive momentum signals, emphasizing industries that tend to outperform in inflationary environments. The fund charges 15 bps in fees and yields 1.60% annually.

Quadratic Interest Rate Volatility And Inflation Hedge ETF (IVOL Quick QuoteIVOL - Free Report)

The Quadratic Interest Rate Volatility and Inflation Hedge ETF is actively managed and seeks to achieve its investment objective primarily by investing, directly or indirectly, in a mix of U.S. Treasury Inflation-Protected Securities and long options tied to the shape of the U.S. interest rate curve. The expense ratio of the fund is 1.03%. It yields 4.05% annually.

Horizon Kinetics Inflation Beneficiaries ETF (INFL Quick QuoteINFL - Free Report)

The actively managed ETF seeks long-term growth of capital in real (inflation-adjusted) terms. It seeks to achieve its investment objective by investing primarily in domestic and foreign equity securities of companies that are expected to benefit, either directly or indirectly, from rising prices of real assets (i.e., assets whose value is mainly derived from physical properties such as commodities) such as those whose revenues are expected to increase with inflation without corresponding increases in expenses. It charges 85 bps in fees and yields 1.79% annually.

Any Silver Lining?

Having said all, Dimon described the U.S. economy as "booming," pointing to strong consumer credit, robust home and decent stock prices, and the overall resilience of the financial sector. Hence, the above-mentioned inflation-beating products – that involve stocks, ETFs and alternative assets – should perform decently on the bourses due to still-strong demand profile.