Robert Buckland, Citi’s global equity strategist, explains to clients how they can hedge against three major stagflation themes: high inflation (higher interest rates), and lower growth. Buckland stated that you can do this by investing in commodity stocks, defensives and rates-sensitive growth stock. Investors who fear that commodities prices will rise should also consider financials.

On the first stagflation risk of high inflation, Buckland said the Energy, and Metals & Mining sectors provide good inflation hedges. He also notes that commodities-exposed equity markets such as Australia or the U.K. are more resilient.

According to the strategist, growth stocks are most sensitive to rising real rates. He commented that an increase in U.S. TIPS yields (currently -0.1%) or +1.0% would imply that the MSCI US Growth Index (NASDAQ proxy), will be increasing from 28x to 18x.”

He said that defensive sectors such as Utilities and Consumer Staples, Health Care and Telecoms need to perform better in EPS revisions. Additionally, U.S. currencies and indices are less defensive than those of foreign countries.