How to play the Inflation Trade

How to play the Inflation Trade

That is when prices rise and goods and services suffer in quality. There is a lot of evidence of skimpflation 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 pandemic is 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 not happy with the fact 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 Susan McGinnis, see the excerpt above or watch the full webinar below.

How do I play the Inflation Trade?

David Schassler, Portfolio Manager of the Inflation AllocationETF, RAAX, at VanEck, is concerned about the stagflationary scenario.

00: 38: 15 Corporate earnings are under pressure. The 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.

If you are not looking, some businesses are adding surcharges to their bills that could cause you to miss it. The surcharges may be paid 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, due to the national labor shortage and supply chain disruptions. As the quality of service declines, will there be a breaking point for consumers and businesses?

Bonds and stocks fell in tandem in the 1970s because of the stagflation. 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 for a stagflationary environment and its effects on a traditional 60 -- 40 portfolio.

The big bugaboo in a room that hasn't been talked about. Earnings will be negatively impacted by wage pressures with the big question: Can companies raise prices just enough to offset wage hikes or will shareholders bear the brunt of lower earnings.