How to play the inflation Trade during these times

34
2
How to play the inflation Trade during these times

It's when prices rise and goods and services suffer in quality. There is a lot of evidence of skimpflation 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 pandemic is nearing the two-year mark and consumers are noticering that service just 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 not aware 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, which creates 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 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. Wage inflation is putting the pressure on the margins. The employees are demanding higher wages because 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 you may miss it if you are not looking. Surcharges can be imposed 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?

The 1970s 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, 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 much, is a room that hasn't really been talked about. Earnings will be weighed by wage pressures, and companies can raise prices just enough to offset wage hikes or will shareholders bear the brunt of lower earnings.