.
00:00 Intro
01:03 Inflation and Stagflation Protection
05:30 Commodities Funds
06:41 Conclusion
07:04 Credits

Let’s talk about guarding your investments from inflation, stagflation, and anything else the economy can throw at you. GDP is down from 6.8% to 1.4, inflation is up by 7.5% as of March, one more quarter of low economic out put, and you can add stagflation to the list. The half a decade long bull market has come to an end, bonds are down by an average of 6% while stocks are down by an average of 16%. I’ve learned a lot of hard lessons from the pandemic, and that’s to keep some cash to cover about 6 months of expense. With goods and services rising, this is starting to dwindle away, this begs the question, where should I invest now?

Today’s fear doesn’t seem quite as drastic, but does bring back some memories from the U.S. economic uncertainty from 2007, and 2020. The gross domestic product or GDP is down to 1.4% compared to 2020. Inflation has been treading up since Oct 2021, reaching a high of 7.55 in Mar 2022 before showing sign of tapering off. We haven’t seen inflation this high since December 1981 where it was at 7.9%. Energy prices increased by 32%, gasoline by 48%, fuel oil by 70%, similar food prices also ticked up by 9%, such a quick jump hasn’t been seen since May of 1981 as the crises wages in Europe. It’s important to remember that the market moves in cycles, and as quickly as they come, they will eventually dissipate. The key is to find creative ways to take advantage of a down market.

According to the WSJ, The bond market hasn’t been this bad since the mid 1800’s. As inflation rose, bonds have lost 10%, producing some of the worst returns in U.S. history. Long term treasury bonds lost more than 18% this year through April reviling record highs of 17% losses set back in 1980 and being the worst since the mid 1800’s according to a study done by Edward McWuarrie. This all can be summarized to by saying that inflation is bad for bonds.
All of this fear regarding interest rate has also dragged the S&P 500 down at a rate not last seen sense 2020. The Nasdaq, which is tech heavy has fallen off by 25%. All of which is compounded by the FED’s plan to reduce inflation by increasing interest rates. The Important thing to remember here is why we might have invested into bonds. It’s certainly not to get rich, but merely as a better alternative than to holding in cash because of the dividend payments.

This brings us to our next question, can defensive ETF’s offer some protection against an unpredictable and volatile market. According to an article titled “Investors Rush Into Defensive ETFs as Market Turbulence Grows written by Hardika Singh, 50 billion dollars worth of investing have been channeled into defensive ETF’s for this year Defensive sectors includes consumer staples, healthcare, utilities, real estate, precious metals, treasures and commodities. According to Warren Buffets, the first rule of investing is, “Don’t lose money”, the second rule, is don’t for get rule number one. A few investors are taking this rule to heart and are scrambling to find safe havens to invest their money.

Funds Discussed:

– The Vaneck Gold Miners ETF [ Ticker: GDX ] risen 3.14 % This Year.

– Invesco DB commodity Index Tracking Funds [ Ticker: DBC ], holding commodities futures in energy, precious metals, industrial metals and agriculture increase by 36 percent.

Conclusion
Early this week stocks declined by 4% as the sell off continues. Now oil and crypto currencies reach new lows for 2022. To avoid stagflation, the federal government will have to raise interest rates, while negotiating bottlenecks in the supply chain, which may also causes inflation! with the goal of avoiding triggering a recession. Commodity ETF’s might seem like a safe haven in the short term, but pale in comparison when compared to the S&P 500 index funds. So now what? I am going to continue dollar cost averaging into the low cost index funds, and stay the course for the next few decades and at some point rebalance with bonds….(read more)

HOW TO: Hedge Against Inflation

REVEALED: Best Investment During Inflation

HOW TO INVEST IN GOLD: Gold IRA Investing

HOW TO INVEST IN SILVER: Silver IRA Investing