Specializing in retirement planning and personalized investment management.

Inflation Is Here - Do Something

The Blue Water Team

Contrary to previous market conditions, high inflation is one of the biggest market risks currently. In April 2021, for example, year-over-year inflation was 4.2%. 

Inflation Lessons from the 1970s

Investors concerned about high inflation rates can learn from the 1970s, when inflation rose steadily until dramatic measures from the Federal Reserve Chairman halted it. 

During this time, commodities and gold outperformed traditional assets, thanks to their distance from the impacts of inflation, and their flexibility in responding to changes in the supply and demand chains. 

Inflation Lessons from the 2000s

In the mid-2000s, a less severe incidence of inflation also provides lessons for investors today. In particular, during the high inflation period between 2005 and 2008, natural resource equities, infrastructure, gold, REITS, and commodities outperformed other investment options. 

The Success of Gold

In both the 1970s the 2000s, gold was the strongest performer, especially in the second half of each inflationary period. 

The Rise of Real Assets

Since the mid-2000s, real assets have failed to perform as successfully as other investment options. Today, however, in the face of rising inflation, they are beginning to perform more strongly, and their approximately 10 years of underperformance have led them to be an inexpensive investment option with much potential to grow. 

Gold and Digital Assets

While gold has not yet demonstrated the strong growth that defined its performance in previous periods of high inflation, the potential for this growth still exists. Over the past 30 days, for example, the price of gold has increased by more than $200. 

Digital Gold

In today's inflationary period, gold is in competition with digital assets, such as Bitcoin, thanks to the latter's scarcity, exchangeability, and the fact that it cannot be counterfeited. As a result, Bitcoin may serve investors well who wish to create portfolios that can succeed in the midst of high inflation. 

Real Asset Allocation

In light of these facts, real assets are a clearly smart choice for investors looking to build successful portfolios in the midst of high inflation. Historically, portfolios that consist of at least 15% inflation-fighting assets perform best, while portfolios diversified among gold, real assets, Bitcoin, etc. could perform well as well. 

If you'd like to discuss how to combat inflation, please contact us.

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