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Still Early Innings for Inflation

April 04, 2022

Read Time 1 MIN

Early warnings about inflation have become a reality, with many investors facing the largest bout of inflation they have ever experienced. We explore how they can adjust their portfolios.

In January 2021, when inflation was 1.4%, we started to warn that big money supply policies would lead to a surge in demand and increase the risks of inflation. Our warnings of high inflation became louder and louder through the summer of 2021, as signs of inflation became more and more apparent. Yet, most dismissed these concerns as extreme, while the U.S. Federal Reserve (Fed) dismissed any inflationary pressures as transitory. Here we are now, with inflation running at 7.9%.

We are now warning that inflation may accelerate even further, based on the events in Ukraine, establishing an elevated and prolonged “new normal” inflation environment. This new normal rate of inflation may be significantly higher than the 1.8% average inflation rate realized over the past decade. As we have suggested, inflation has a tendency to snowball. Roll a snowball down a hill. It starts small, but gets bigger and more destructive, quickly. Once that happens, it becomes very hard to control.

This white paper takes a closer look at what the data indicates about the outlook for inflation and what investors can do to protect their portfolios. Topics include:

  • Impact of Fed policy on inflation.
  • Factors driving up inflation, including a potential wage-price spiral, supply constraints and housing costs.
  • Economic consequences of the Russia-Ukraine crisis.
  • Assets that historically benefit from inflationary cycles.
  • How to allocate for inflation protection.
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Please note that VanEck may offer investments products that invest in the asset class(es) or industries included herein.

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.

All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future results.

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