How to play the inflation trade in these times

61
2
How to play the inflation trade in these times

That'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 at the convenience store, and bare-bones customer service at the airport or hotel reception desk.

The COVID 19 pandemic is inching closer to the two-year mark and consumers are noticering that service just hasn't been the same at the local restaurant, the airport or hotels. Businesses across the country are facing inflationary pressures that are showing up in the details. 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 skimping 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 hosted 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 Inflational Allocation ETF, 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.

Some businesses are adding surcharges to their bills that may cause you to miss it if you are not looking. Surcharges may 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?

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

The big bugaboo in a room that hasn't been talked about, is a room that hasn't really been talked about. Earnings will be affected by wage pressures and whether companies raise prices just enough to offset wage hikes or will shareholders bear the brunt of lower earnings.