For some soothsayers, the US economy may be ravaged by a two-headed monster: inflation and stagnant growth.

Stagflation, the ugly sounding anomaly where prices keep rising in a contracting economy, may be the beast that dominates another recession.

Not seen in a generation, stagflation requires special investments to combat its punishing impact on your portfolio. You will also need to chuck the conventional wisdom on what works in a recession.

All the signs are there. Gross domestic product barely eked out a gain in the fourth quarter. Consumer-price inflation climbed above four percent last year. Gold set a record high of $929 an ounce on January 30.

Adding to the spate of bad news, existing-home sales dropped 13 percent last year. In January, the US lost jobs for the first time in four years.

For the average investor, all of these numbers mean that you will need to plan ahead, particularly if inflation accelerates and there's a loss in purchasing power.

Mainstream advice has always been to hunker down in bonds if a slowdown is imminent. That's because the Federal Reserve usually cuts interest rates to stimulate lending and growth. That's generally bullish for fixed-income securities.

The Fed followed its traditional rate-cutting script by lowering the target for its benchmark rates by 50 basis points to three percent on January 30. Eight days earlier, it ordered a 75-basis-point emergency reduction. More cuts may be on the way.

Yet bonds may not be a haven this time. If the cost of living rises unabated, that depresses bond prices.

One refuge in inflationary times has been gold. Held in huge quantities by large banks and the favourite commodity of inflation speculators, it has been in demand over the past year.

Gold's spot price gained more than $250 an ounce in the annual period through February 7.

Does that mean you should hold the yellow metal in large amounts or is it simply the anticipation of big investors that rampant inflation lurks in the future? Focussing on the recent past — often a red herring for individual investors — you might reach the conclusion that gold will trump stocks and bonds in this environment.

After all, the metal was at only $607 an ounce on January 5 last year. Say you were to take a plunge on gold. If you were sold on the inflation-resurgence theory, then you would want to hold vehicles that follow its price as closely as possible. Outside of the cumbersome buying and delivery of bullion, you can own gold through the Streetracks Gold Trust, an exchange-traded fund that directly reflects the metal's price.

What you get is price performance on gold bullion minus the fund's 0.40 percent expense ratio and commissions.

Remember that inflation was in check for most of the last quarter century. Over the past 15 years alone — a time that included a stock-market crash — gold's annual return lagged that of the Standard & Poor's 500 Index by 137 percentage points through January 31. You are better off buffering the ravages of inflation on your portfolio.

That means finding investments that combine income and price appreciation, and rise with inflation expectations.

Two investments come to mind: commodities and Treasury inflation-protected securities, or TIPS. A deft combination of TIPS and commodities can be found in the PIMCO Commodity Real Return Strategy Fund. It returned 23 percent last year. This is my portfolio's key inflation buffer.

Whatever stagflation strategy you adopt, remember that overconcentrating in any of the inflation-fighting vehicles will add unnecessary risk to your portfolio.

Inflation is an often-unpredictable ogre that creeps up slowly. You will need a number of weapons to do the job.

(John F. Wasik, author of "The Merchant of Power," is a Bloomberg News columnist. The opinions expressed are his own.)