10 Best ETFs for Stagflation
Nine out 10 of these stagflation ETFs are outperforming the S&P 500 in 2025.
In 2025, concerns about stagflation—a combination of stagnant economic growth and persistent inflation—are on the rise. Several factors contribute to this outlook, including recent trade policies and economic indicators.
A new tariff war with major U.S. trading partners Canada, Mexico and China is expected to increase costs for U.S. consumers and businesses, potentially leading to higher inflation and dampening economic growth.
Economists predict that these tariffs could result in a slight decrease in GDP growth over the next year, with consumer and business confidence playing a crucial role in determining the extent of the economic slowdown.
Additionally, data released in last week's Personal Consumption Expenditures (PCE) report showed that consumers slashed their spending by 0.2% while inflation remained the same at 2.6%, well above the Federal Reserve's target rate of 2%.
An inflationary scenario could lead to a 10% correction in stock prices, as inflation remains elevated while economic growth slows.
The broader market, as measured by the S&P 500 SPDR ETF Trust (SPY), fell 7% from its recent high before climbing slightly higher Wednesday.
Meanwhile, defensive sectors like healthcare, consumer staples and utilities, which can outperform in stagflationary environments, are outperforming the S&P 500 in 2025.
What Is Stagflation?
Stagflation is an economic environment that combines stagnant economic growth with high inflation. Imagine an economy stuck in neutral, where prices for goods and services are high and rising but businesses aren't expanding, and unemployment is high or rising. This creates a double whammy for consumers, as their purchasing power shrinks while job opportunities dwindle.
In 2025, the only missing ingredient for full on stagflation is high unemployment, but a slowing economy can change that this year and investors are wise to educate themselves on the best types of investments to buy and hold in this challenging environment.
What Are the Best ETFs for Stagflation?
There isn't a guaranteed perfect ETF for stagflation because stagflation is a complex economic condition with a combination of high inflation and stagnant economic growth. However, there are some types of ETFs that might perform better than others during stagflation. Here are a few to consider:
Defensive Sector ETFs
Defensive sectors like consumer staples, healthcare and utilities are generally considered good investments for stagflation. These sectors provide essential goods and services that people need regardless of economic conditions. Even during periods of high inflation and stagnant growth, people will still need electricity, healthcare and basic consumer products. Examples include:
- Health Care Select Sector SPDR Fund (XLV)
- Utilities Select Sector SPDR Fund (XLU)
- Consumer Staples Select Sector SPDR Fund (XLP)
Commodity ETFs
During stagflation, commodities may perform well as they tend to retain value during periods of high inflation. Consider ETFs that track the prices of commodities such as gold, silver, oil and agricultural products. Examples include:
- SPDR Gold Shares (GLD)
- iShares Silver Trust (SLV)
- United States Oil Fund (USO)
- Invesco DB Agriculture Fund (DBA)
Short-Term Treasury Bond ETFs
Short-term treasury ETFs can provide relative safety and liquidity during stagflation. While they may not offer high returns, they can help preserve capital in uncertain economic environments by providing high relative yields with low interest-rate sensitivity. Examples include:
- iShares Short Treasury Bond ETF (SHV)
- Vanguard Short-Term Government Bond ETF (VGSH)
- iShares 0-3 Month Treasury Bond ETF (SGOV)
10 Best ETFs for Stagflation
| Ticker | Fund | Expense Ratio | AUM | YTD Return |
| GLD | SPDR Gold Shares | 0.40% | $84.2B | 11.12% |
| SLV | iShares Silver Trust | 0.50% | $13.9B | 10.14% |
| XLV | Health Care Select Sector SPDR ETF | 0.08% | $38.9B | 7.72% |
| XLP | Consumer Staples Select Sector SPDR ETF | 0.08% | $16.9B | 4.44% |
| XLU | Utilities Select Sector SPDR ETF | 0.08% | $17.7B | 3.10% |
| VGSH | Vanguard Short Term Treasury ETF | 0.03% | $21.6B | 1.21% |
| SGOV | iShares 0-3 Month Treasury Bond ETF | 0.09% | $35.9B | 0.73% |
| SHV | iShares Short Treasury Bond ETF | 0.15% | $19.4B | 0.70% |
| DBA | Invesco DB Agriculture | 0.85% | $865.7M | -1.50% |
| SPY | SPDR S&P 500 ETF Trust | 0.95% | $610.9B | -1.57% |
| USO | United States Oil | 0.70% | $903.2M | -2.96% |
Data as of March 4, 2025.
Bottom Line on ETFs for Stagflation in 2025
While there is no single best ETF to buy for stagflation, there are a number of ETF types that tend to outperform the broader market averages during stagflation. These include commodity ETFs, short-term Treasury ETFs and defensive sector ETFs. Of the 10 stagflation ETFs we list here, nine are outperforming the S&P 500 in 2025. While there is no guarantee this performance will continue, the data provides valuable historical reference.
Other areas of the market that can perform relatively well in stagflation include Treasury inflation-protected securities (TIPS) ETFs, dividend ETFs and real estate ETFs. However, in 2025, with potential for sticky inflation and higher-for-longer interest rates, investors have favored short-term and ultra-short-term Treasury ETFs, which have higher yields and lower market risk compared to other bond funds, and utilities ETFs for income generation combined with defensive qualities.
Stagflation can be a volatile economic period. Investors are encouraged to consider their risk tolerance and choose ETFs that align with their comfort level and primary investment objectives.
It's important to remember that past performance is not necessarily indicative of future results and diversification is wise in uncertain environments.
