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 pandemic is close to the two-year mark and consumers are starting to notice that service hasn't been the same at the local restaurant, airport or hotels. There are inflation pressures that are showing up in the details, and businesses across the country are facing. 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 is the host of the 45 minute conversation, 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 ETF, RAAX, said he was 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.
Some businesses are adding surcharges to their bills because they might miss it if you are not looking. The surcharges can be billed 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 matter of fact due to the national labor shortage and supply chain disruptions. Will there be a breaking point for consumers and businesses as the quality of service declines?
Stocks and bonds fell in tandem in the 1970s due to 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, is something that hasn't really been talked about. Earnings will be negatively impacted by wage pressures, so can companies raise prices just enough to offset wage hikes or will shareholders bear the brunt of lower earnings.