How to play the inflation trade in these times

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How to play the inflation trade in these times

It's when prices rise and goods and services suffer in quality. There are signs of skimpflation all 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 epidemic is inching closer to the two-year mark and consumers are noticering that service 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 arenoticing that hotels are no longer providing 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 inflationproof your portfolio during these challenging times. The 45 minute conversation with Susan McGinnis is hosted by TheStreet. You can see the excerpt below or watch the full webinar below.

How do I play the Inflation Trade?

David Schassler, Portfolio Manager of the Inflation Allocation Exchange Traded Fund, RAAX, at VanEck, 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 and taking the reins. Schassler says he is looking for companies that benefit from higher inflation.

Some businesses are adding surcharges for their bills that could cause you to miss it if you are not looking. Surcharges may 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, as a result of 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, Quadratic Capital Management, is concerned about the potential impact of a stagflationary environment 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 can companies raise prices just enough to offset wage hikes or will shareholders bear the brunt of lower earnings.