Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan
Gold Price Back Below $1,800! - 10th Sep 21
The Inflation/Deflation debate wears on… - 10th Sep 21
Silver Price seen tracking Copper prices higher - 10th Sep 21
The Pitfalls of Not Using a Solicitor for Your Divorce - 10th Sep 21
Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
This Boom-Bust Cycle in US Home Ownership Should Give Home Shoppers Pause - 9th Sep 21
Stock Market September Smackdown Coming Next? - 9th Sep 21 - Monica_Kingsley
Crazy Crypto Markets How to Buy Bitcoin, Litecoin for Half Market Price and Sell for TRIPLE! - 8th Sep 21
Sun Sea and Sand UK Holidays 2021, Scarborough in VR 180 3D! - 8th Sep 21
Bitcoin BTC Price Detailed Trend Forecast Into End 2021 - 8th Sep 21
Hyper Growth Stocks - This billionaire is now using one of our top strategies - 8th Sep 21
6 common trading mistakes to avoid at all costs - 8th Sep 21
US Dollar Upswing, S&P 500 and Nasdaq Outlook - 7th Sep 21
Dovish Assassins of the USD Index - 7th Sep 21
Weak August Payrolls: Why We Should Care - 7th Sep 21
A Mixed Stock Market - Still - 6th Sep 21
Energy Metals Build Momentum; Silver & Platinum May Follow - 6th Sep 21
What‘s Not to Love About Crypto Market Fireworks - 6th Sep 21
Surging US Home Prices and Gold – What’s the Link? - 6th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Here’s What You Should Do About Inflation

Stock-Markets / Inflation Aug 10, 2021 - 12:10 PM GMT

By: Submissions

Stock-Markets By Justin Spittler -  “What should I do about inflation?”

My Uber driver recently asked me this after I told her what I do for a living.

And she’s not the only one asking me this question.

My mom… brother… friends who’ve never bought a stock in their lives… and many of you who read my essays every week want to know the same thing:

Why are pricing soaring? Should I do anything to prepare?

And most importantly…

What should I do with my current investments?

I’ll let you know exactly what to do in today’s RiskHedge Report.

But first, let’s look at why inflation fears have been front and center on most folks’ minds…
  • By now, I’m sure you’ve noticed that prices for everyday goods have been soaring…

You’re paying more for gas at the pump.

Your grocery bill is probably higher than it was a few months ago.

Those new clothes for your kids’ first day of school are more expensive than last year.

Now to be fair, prices for everyday goods and services have been creeping higher for pretty much all of modern history.

So, why is inflation suddenly on everyone’s minds?


The government is finally admitting that inflation is a problem.  

The chart below shows the Consumer Price Index (CPI) going back to 1990. This index tracks a basket of everyday goods and services. A rising CPI means that inflation is climbing.

You can see that inflation has exploded recently. In June, it hit its highest level since 2008.


Source: US Bureau of Labor Statistics

Inflation is now the talk of the investment world…

CNBC, MSNBC, and other mainstream financial media outlets can’t go a day without a feature on it.

It’s important to know that inflation isn’t just a matter of everyday stuff getting more expensive. The inflation rate is one of the most important pieces of data in all of finance. A small tick in the rate can cause billions of dollars to flood out of some investments and into others.

That’s because the inflation rate affects EVERYTHING. It anchors investors’ expectations about the returns they need to generate. When inflation is running at a rock-bottom 1%... investors may be satisfied earning 5% per year.

But when inflation soars to 7%, nobody’s going to be happy earning 5% a year... because they’re losing money!

  • Inflation recently had its “magazine moment.”

Just look at this cover that Barron’s published for its May 2021 issue.

Source: Barron’s

As I explain in this essay, magazine covers are a contrarian indicator…

You see, magazines can be great sources of information.

But the folks who write these publications aren’t world-class investors. They’re journalists.

Most of the time, they write about what’s hot in the markets. That’s how you sell issues and subscriptions.

Because of this, magazine covers can tell us a ton about public sentiment. They can even offer incredible contrarian investing signals…

In this case, everyone is now thinking about inflation. It doesn’t matter if you work on Wall Street or at a bakery.  

And that tells me one thing…

  • The big money from the “inflation trade” has already been made…

One way to see this is by looking at the recent action in commodities prices.

Commodities are the building blocks of our world. Lumber, steel, concrete, oil, aluminum, silver, natural gas, palladium, corn, soybeans...

They’re the “inputs” that form the foundation of the economy.

While there are a lot of ways to hide or misstate inflation... commodities prices always tell the truth.

In other words, if there’s real inflation going on... it’ll show up in commodities prices.

Back in May, lumber prices were going berserk. At the time, they were up 278% in just over five months.

But take a look at what’s happening today.

As you can see, lumber is no longer rocketing higher. It’s in free fall...

Since peaking in May, the price of lumber has crashed 63%.

Source: StockCharts

And that’s just one example.

Platinum has fallen 16% since February. Silver is down on the year after a short-lived rally, while gold—many investors’ “inflation hedge”—has been declining since last August.

At the same time, bonds have surged in recent weeks.

This chart shows the performance of the iShares 20+ Year Treasury Bond ETF (TLT), which invests in government bonds. You can see that TLT has rallied 13% since March.

Source: StockCharts

Bond prices typically fall when inflation is rising. That’s because most bonds pay a fixed rate of interest.

If you own a bond that pays 3% and inflation is just 1%, you’re making money. If inflation surges to 5%, you’re suddenly losing money. That, in a nutshell, is why investors dump bonds when they expect inflation.

But as you can see, bonds have been marching higher since early spring...

  • In short, the market “priced in” inflation long before the government released its official figures.

Remember: Markets look to the future.

That’s why you should never make investment decisions based solely on economic data or magazine articles. There’s a great chance that the big money has already been made.  

And this doesn’t just apply to inflation.

We’ve seen this play out in cannabis stocks, crypto miners, and uranium miners in the past.

Now, this doesn’t mean inflation doesn’t exist…

Thanks to the Federal Reserve, prices for everyday goods will likely continue increasing.  

But the time to bet on inflation isn’t when it’s being plastered all over magazine covers. It’s when no one else is talking about it.

  • So, here’s what I recommend if you’re concerned about inflation…

Hang on to the stocks you already own.

Owning stocks is a good way to protect your wealth when inflation is eating away at your purchasing power.

See for yourself. This chart shows the performance of the S&P 500 alongside “M2 Money Supply,” which measures the amount of money in circulation.

As you can see, the money supply has exploded since the last global financial crisis… thanks to a surge in money printing by the Federal Reserve.

US stocks have climbed 212% over the same period… making them an excellent way to preserve and grow wealth.

At the same time, the S&P GSCI Commodity Index—which tracks the performance of hard assets like gold—has climbed just 58% since 2009.

Source: StockCharts

In other words, stocks have massively outperformed traditional inflation hedges over the past decade.

Keep this in mind the next time someone suggests you make a big bet on inflation.

The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money"

Get our latest report where we reveal our three favorite stocks that will hand you 100% gains as they disrupt whole industries. Get your free copy here.

© 2021 Copyright Stephen McBride - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in