How to play the Inflation Trade
When prices rise, 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 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 arenoticing that service hasn't been the same at the local restaurant, the 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. Susan McGinnis hosts the 45-minute conversation. You can see the excerpt above or watch the full webinar below.
How do I play the Inflation Trade?
David Schassler, Portfolio Manager at VanEck, the Inflation Allocation ETF, RAAX, is concerned about the stagflationary scenario.
00: 38: 15 Corporate earnings are under pressure. With wage inflation pressured 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 that could cause you to miss it if you are not looking. The surcharges may be imposed in the form of a COVID- 19 fee, Coronavirus fee, PPE fee, Sanitation Fee, or Cleaning Fee. Skimpflation is one measure that isn't being captured in government data despite its seemingly transitory nature, which is a concern with 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 bonds and stocks decline in tandem. While the current fiscal and monetary 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 at Quadratic Capital Management, is concerned about the potential stagflationary environment and its effects on a traditional 60 -- 40 portfolio.
The big bugaboo in a room that hasn't been talked about much, is a room that hasn't really been talked about. Earnings will be negatively impacted by wage pressures: can companies raise prices just enough to offset wage hikes or will shareholders bear the brunt of lower earnings?