Inflation can be an accumulation or piling on of various and individual price increases such as the oil price spike of the 70’s. Today, many put forth the transitory inflation argument based on the fact that there are small pockets of inflation caused by shortages (supply shocks) and supply chain issues. Issues that might soon be resolved.
We’ve talked about those inflation hot spots in the past. From that Vox post, and on the suggested strategy:
“Instead, the federal government should be intervening in specific areas to keep specific types of prices that are rising rapidly from further accelerating.”
Can central banks and politicians stickhandle their way through any inflation or stagflation threat? That remains to be seen, and there are so many different moving parts. No economic period is the same. No stock or bond market correction or rally is the same.
The VOX article, while very good, is a guess. Perhaps even a very well-thought-out and educated guess. That said, predictions about the economy are hard to make.
At least we’re talking about inflation and its real risks. When we protect our wealth, we don’t guess; we create a portfolio based on a truth—that we don’t know the future. We don’t know what’s in store.
Gold and other commodities have worked to protect portfolios during stagflation (see those supply shocks), while stocks were no match for inflation in the U.S. and Canada. To my knowledge, international stock markets were also not the required hedge, though certain types of stocks such as energy and commodity-related, tech and consumer discretionary, might help the cause. You might shade in some inflation-adjusted bonds to your fixed income component.
Invest and perhaps hedge accordingly.