If Inflation Is Coming, Here Is What to Do About It
The single most important question in investing this year is whether the rampant inflation of the moment is temporary, as the Federal Reserve believes, or marks a historic shift. I argued last week that we are on the cusp of a major change and long-run inflation is now more likely.
The interplay of timing and uncertainty prevents there being a single simple answer. However, there are useful strategies that can be put to work now. If you agree that inflation is more likely, it is important to act, as ordinary bonds are awful investments under inflation, while stocks overall have been poor.
Ask on social media how to protect against inflation, and the answer is simple: Just buy gold. Not so much this year, when the price of gold has fallen as inflation doubled from 1.3% to 2.6%. But it is true that gold, historically, has performed well when inflation is high, holding on to its value even in countries where inflation soared into double-digits, according to a study for Credit Suisse by academics Elroy Dimson, Paul Marsh and Mike Staunton.
