If you knew for certain that the fed was going to let inflation run hot without raising rates where would you invest and what would you avoid? I bought some gold and a gold miner stock and looking at adding another REIT. Not sure if inflation will pan out but would like to have a few holdings designed to at least do well in that environment.
Growth stocks will be my answer for everything for the next 20 years until I'm at retirement age.
If I was retired and depending on my financial situation, I might consider gold but stocks usually outperform on most timelines.
In your scenario of inflation running hot without rising rates, I think growth stocks will outperform gold by a large factor. Why wouldn't they? Lets say we don't get that much inflation, then gold does nothing, possibly depreciating, while growth stocks still go up. If rates rise, the dollar becomes stronger, and gold goes lower. What do stocks do? They get hit as well, but they will recover quickly in my opinion.
Many experts are saying growth stocks could take a hit during inflation because you are paying up for future earnings that will pay you back in dollars that are worth less in the future.. I'm still keeping my growth stocks but not adding to them unless they get hit real hard. I added some gold and a gold miner stock but only about 5% of the portfolio. I may write calls on the GLD shares to generate some income. I would think companies that own real assets may do selectively well. I still don't like office building or retail REITS but I'm thinking of adding something like Mid America Apartments that has residential apartments in the southeast and southwest since rental rates may rise to keep up with inflation.Originally Posted by boneil
Some of the talking heads are saying we may see a brief period of inflation others are saying it could be a longer period. I have no idea but I don't have much in the way of alternative assets in the accounts so needed to diversify. The scary part is with the amount of debt we have the fed will not be able to raise interest rates much to respond. Pretty much everyone agrees that US bonds are not the thing to own but that has been the case for the last 2 years given where rates have been. 2021 could be an interesting year if what they are predicting comes to pass. The good thing is that so many people believe inflation is coming that it probably won't happen. If it does it will be interesting to see if Bitcoin acts as a store of wealth as many have predicted.
You are going to think I'm crazy, but if they are going to let inflation run hot, which is what I have also heard, I'm safest in cash. My reasoning is that if they let it run hot, it will get to a point fairly quickly where they will have to slam on the brakes or risk the spiral of ultra inflation, which can't happen. When they slam on the brakes, the economy will hiccup big time and present a buying opportunity in deflated assets that will have more growth opportunity that will outpace longer term inflation....
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I'm keeping some cash also. I think there is so much uncertainty you probably need a little bit of everything. A change in administration, a pandemic, and debt and it is anybody's guess where we go from here.
I've been buying into BTG as a gold miner. Price seemed pretty good for an entry point last week, but has continued to drop since. I will buy some more today depending.
Yeah my GOLD is down since I bought it as well. I may add some more if it falls further. Not going to make it a big position just would like some exposure.
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