Watching inflation erode purchasing power is frustrating. From consumer products to housing and gasoline, the prices of products and services are rising in this inflationary environment. Yahoo Finance interviewed several stock market experts: How can investors protect themselves against inflation?
Here are some of the strategies they highlighted:
âStocks have traditionally been viewed as a hedge against inflation because a business is expected to be able to offset rising input costs by charging more for its products and services. In this environment, we expect most businesses to see their revenues and profits increase. with inflation over time, âTimothy Chubb, CIO at Girard, a division of Univest Wealth, told Yahoo Finance.
âDuring times of high inflation, investors might consider having a higher allocation of equities in their portfolio. With higher inflation to come, many assets have incorporated rising inflation into their portfolio. their assessment, âChubb added.
Commodities on the equity markets
“If you think the markets are going to somehow benefit from inflation over the medium term, then I think you want to be long on things like the commodities sectors within the US stock markets, potentially small stocks. capitalization, or some exposure to metals and mining and things of that nature, “Stuart Kaiser, head of equities at UBS, told Yahoo Finance.
“If you are worried that inflation will trip the [market] rally, then you watch the trades bearish, âKaiser said. âMost of the investors we’ve spoken to are really focused on the tech sector for that, whether it’s the Nasdaq (^ IXIC), mid-funds, large-cap S&P (^ GSPC) tech and things of this nature, âKaiser added.
“One of the areas where we have continued to be overweight is banking and financials. They benefit from higher rates, they benefit from a steeper yield curve,” said Ellen Hazen, portfolio manager at FL Putnam Investment Management, at Yahoo Finance Live.
âYou have JPMorgan (JPM) and Bank of America (BAC), both of which are trading at less than twice book value, and profits for about 20 years,â she added.
Hazen also noted that banks will benefit from strong loan growth and credit quality, thanks to a growing economy and rising GDP.
Hazen is an advocate for looking at real assets, “particularly areas like forests, infrastructure, real estate,” Hazen said.
“We are overweight real estate investment trusts (REITs) and we are also looking at infrastructure funds, as a way to protect against higher inflation,” she added.
Hazen went on to say, “You want to be careful not to own too many businesses that are exposed to low-wage workers because those wages are increasing by double digits as labor has become so scarce.”
Long $ TIP / Short $ IEF
“The cleanest way that I know of is to simply buy Inflation Protected Treasury Securities (TIPS) and Traditional Short Treasury Bills (IEF). The bond market is doing it for you. you and you can run it easily using ETFs, âJC Parets, founder of allstarcharts.com, said Yahoo Finance. TIPS are government bonds that increase in value with inflation.
“Anything beyond that is speculation,” Parets says. “The gold bugs (GC = F) love to lie to people that gold is a good hedge against inflation. Last year certainly proved it was hilarious to be wrong,” he said. he declares.
“Some say Bitcoin (BTC-USD) and / or other cryptocurrencies. Traditionalists just say owning stocks … In my opinion, you are simply betting on the value of those assets themselves rather than one” “magic inflation hedge.”
Parets suggests: “If you want to buy gold and think it’s going higher, buy gold – don’t worry about inflation. If you want to buy crypto – then buy crypto – don’t worry about inflation. And if you want to own stocks – buy stocks – don’t worry about inflation. “
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