How to play the inflation Trade
It's when prices rise and goods and services suffer in quality. There are signs of skimpflation all around us. Maybe you're seeing longer waits for food delivery, fewer condiment options available at the convenience store, and bare-bones customer service at the airport or hotel reception desk.
The COVID 19 epidemic is nearing the two-year mark and consumers are noticing 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 noticering 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. The 45 minute conversation is led by TheStreet's Susan McGinnis. You can see the excerpt above or watch the full webinar below.
How do I play the Inflation Trade?
David Schassler, Portfolio Manager of the Inflation Allocation Exchange Traded Fund, RAAX, at VanEck, is concerned about the stagflationary scenario.
00: 38: 15 Corporate earnings are under pressure. Wage inflation is putting pressure on the margins. Employees are demanding higher wages and taking the reins. Schassler says he is looking for companies that benefit from higher inflation.
Some businesses are adding surcharges to their bills that could cause you to miss it if you are not looking. The surcharges can be charged in the form of a COVID 19 Fee, Coronavirus Fee, PPE Fee, Sanitation Fee, or Cleaning Fee. Skimpflation is a measure that isn't 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?
The 1970s saw bonds and stocks decline in tandem. While the current monetary and fiscal policy environment is different, the current investment landscape is not one for investors to be complacent without reassessing and diversifying assets.
Nancy Davis, Founder and Chief Investment Officer, Quadratic Capital Management, is concerned about the potential for a stagflationary environment and the effects on a traditional 60 -- 40 portfolio.
The big bugaboo in a room that isn't really talked about. Earnings will be affected by wage pressures and wage hikes. Can companies raise prices just enough to offset wage hikes or will shareholders bear the brunt of lower earnings?