Experts share where investors should focus their money in a high-inflation environment – Low Calorie Diets Tips

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Inflation continued to rise in May, with worse-than-expected data. The consumer price index (CPI) on June 10 rose 8.6% for the 12 months ended May, the largest 12-month increase since the period ended December 1981.

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This is happening amid a market that has entered bear territory and investors that are growing more nervous by the day. Now several experts are sharing their thoughts on where to invest in this highly inflationary and extremely volatile environment.

gold and bitcoin

Charlie Morris, CIO of ByteTree Asset Management and founder of ByteTree.com, a digital asset data platform, told GOBankingRates that gold has historically provided portfolio protection in inflationary environments, while Bitcoin is the gold of the internet and looks set to emulate this over time .

“It is important to note that inflation protection only works if the asset in question is cheap or fairly valued. Overpriced assets will never manage to provide protection against inflation,” he said. “In 2022, stocks and bonds experienced a simultaneous bubble and as such neither asset class has proven to be an effective hedge against inflation. Bitcoin was also overpriced, but gold was trading close to fair value. Bitcoin is no longer overpriced,” he added.

He also noted that gold is stable while bitcoin is volatile.

“Because they inherently react differently to risk-on and risk-free market conditions, it’s hard to imagine that they have a bubble at the same time,” he said, adding that they don’t compete, play different roles, have a global cross-border and cultural appeal and come together as an all-weather liquid inflation hedge.

precious metals

Derek Izuel, CIO, Shelton Capital Management told GOBankingRates that precious metals prices are driven by long-term expectations of real returns. “As interest rates have risen and Fed sentiment has shifted since late 2021, real interest rate expectations have risen and turned positive for the first time since the pre-pandemic era,” Izuel said. “Gold rises when these expectations are negative, so the Fed’s quick response should put pressure on the precious metals despite rising inflation.”

Gold is back, Edward Moya, Senior Market Analyst, The Americas OANDA, wrote in a note to GOBankingRates. “Gold has regained its safe haven role as financial markets worry about aggressive tightening by global central banks and US economic data slows. Recession fears are mounting and that is triggering a stock exodus and an influx of safe-haven bullion buying,” he added.

property

Izuel said real estate will be weak going forward amid a slowing economy, rapidly rising mortgage rates and an overvalued real estate market.

However, he added that “opportunities may exist in contrarian real estate areas such as multi-family and healthcare properties.”

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Additionally, according to Annuity.org, commercial real estate (CRE) has historically been another effective hedge against inflation, as rising property values ​​and rents allow commercial property owners to preserve the real value of their properties while earning higher incomes over the course of the year Time.

High-interest, variable-rate bank loans

High-yield bank loans (HYBLs), also known as leveraged loans, are another effective way to protect finances from inflation, Annuity.org noted, adding that the protective nature of these loans stems from the fact that their interest rates reset regularly to keep them in line with prevailing market interest rates, which are highly correlated with inflation. However, in difficult economic times, these can exhibit equity-like volatility.

“As a result, they experience periods of illiquidity where the assets cannot be quickly or easily converted into cash without depreciating in value. To minimize your risk, it is highly recommended that you invest in HYBLs through a fund-like vehicle with many individual positions,” according to Annuity.org.

Shares

According to Izuel, the best opportunities are in international markets as sector composition and relative valuation favor these stocks during a slowdown in economic activity.

“Emerging markets will be strong as the economy recovers and China’s lifting of COVID restrictions could be an early catalyst,” he said, adding, “favor smaller stocks in the US — they will drive the recovery and the.” Lead the FANG’s journey. Supplies are gone.”

Commodities and quality dividend stocks

Austin Graff, a portfolio manager at TrueMark Investments, which runs DIVZ, a dividend-based ETF that acts as an inflation hedge, told GOBankingRates that the best hedges against inflation in the current environment are commodities and high-quality dividend stocks.

Graff explained that commodity prices have skyrocketed as demand exceeds limited global supply, and Fed Chair Powell has even indicated that he is unable to control commodity prices – hence prices are likely to get longer remain high than many expect.

As for high-quality dividend payers, “they’re a good option because they often have pricing power and the ability to grow earnings, free cash flow, and dividends with inflationary price increases,” he added.

“At DIVZ, we are currently focused on investing in high-quality dividend payers that also have returns that are directly linked to higher commodity prices,” he added. “Many of these companies have committed to returning the excess cash flow generated by high commodity prices to investors in the form of higher dividends and share buybacks — to protect investors from the effects of inflation.”

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According to Graff, names that fall into the category of beneficiaries of higher commodity prices would include Devon Energy (DVN), Exxon Mobil (XOM) and Coterra Energy (CTRA).

“We are also heavily exposed to healthcare and consumer staples names with pricing power such as Johnson & Johnson (JNJ), UnitedHeatlh Group (UNH), Abbvie (ABBV), Philip Morris (PM) and Altria Group (MO) . ” he added.

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About the author

Jaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications including Dow Jones, Financial Times Group, Bloomberg and Business Insider. She has also worked as a Vice President/Senior Content Writer for major financial firms based in New York, including New York Life and MSCI. Jaël is now a freelancer and most recently worked together with Dr. Sean Manion authored the book Blockchain for Medical Research: Accelerating Trust in Healthcare. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.

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