How to play the Inflation Trade on this time
It's when prices rise and goods and services suffer in quality. There are signs of skimpflation all around us. Maybe you are seeing longer waits for food delivery, fewer condiment options at the convenience store, and bare-bones customer service at the airport or hotel reception desk.
The COVID 19 epidemic is inching closer to the two-year mark and consumers are noticering that service just hasn't been the same at the local restaurant, airport or hotels. The details show that businesses across the country are facing inflationary pressures. Travelers are noticing that hotels are no longer providing daily housekeeping services and that breakfast buffets have turned into grab-and- go cereal and coffee. Companies are choosing to skimp on goods and services instead of raising prices, creating a different type of inflation.
Our team of experts discussed how to inflation-proof your portfolio during these challenging times. Susan McGinnis is the host of the 45 minute conversation. You can watch the excerpt above or watch the full webinar below.
How do I play the Inflation Trade?
David Schassler, Portfolio Manager of the Inflation Allocation ETF, RAAX, at VanEck, is concerned about the stagflationary scenario.
00: 38: 15 Corporate earnings are under pressure. The wage inflation pressures the margins. The employees are demanding higher wages because of the fact that they are taking the reins. Schassler says he is looking for companies that benefit from higher inflation.
Some businesses are adding surcharges to their bills because they may miss it if you are not looking. Surcharges may be incurred in the form of a COVID-19 Fee, Coronavirus Fee, PPE Fee, Sanitation Fee, or Cleaning Fee. Skimpflation is a measure that isn't being captured in government data despite its seemingly transitory nature, which is a measure that isn't being captured by the national labor shortage and supply chain disruptions. Will there be a breaking point for consumers and businesses as the quality of service declines?
In the 1970s stagflation saw stocks and bonds decline in tandem. The current investment landscape is not one for investors to be complacent without reassessing and diversifying assets, as the current fiscal and monetary policy environment is different.
Nancy Davis, Founder and Chief Investment Officer, Quadratic Capital Management, is concerned about the potential impact of a stagflationary environment on a traditional 60 -- 40 portfolio.
The big bugaboo in a room that hasn't been talked about much is in a room that hasn't really been talked about. Earnings will be affected by wage pressures, but can companies raise prices just enough to offset wage hikes or will shareholders bear the brunt of lower earnings.