Inflation is heating up again.
With a recent read near 3.8%, driven by soaring energy prices, the inflationary path of the past decade is starting to look a lot like the period from the late 1960s into the 1980s:
Inflation rates are rising, leading to rising bond yields and an eerily similar trend to the inflation of the 1960s and 1970s. (Source: The Kobeissi Letter)
History may not be exactly repeating itself, but it sure is rhyming.
This tumultuous period provided not just high inflation, but a lost decade for stock market returns. From 1968 to 1980, the Dow struggled to top 1,000.
Adding in the high inflation of that period, markets lost nearly 75% in real terms, the second-worst performance since the Great Depression.
For now, until the inflation trend can get knocked back down, investors would be wise to look for companies that can provide the lowest costs for their customers.
Companies in the commodity space are also attractive in a higher inflation environment, especially if that inflation is driven by expanding central bank balance sheets.
Another alternative? Companies with high growth potential. Despite the low economic growth and horrendous market performance of the 1970s, companies like Intel (INTC) and Microsoft (MSFT) were founded during that time.
Sticky inflation creates a challenging investment environment. Right now, sentiment is through the roof. We’ll see what changes first.
To get one of the best investment ideas for staying invested through periods of sticky inflation, become a member of Grey Swan Pro — details here.
~ Addison
P.S. It doesn’t matter how smart you are or how much money you make in the stock market if you give all your gains to Uncle Sam. Last Friday at 2 p.m. EST/11 a.m. PST, we hosted Nick and friends from Prime Corporate Services for a tax webinar to help you be confident you’re getting all the write-offs that properly structured individual investors are entitled to.
We’ve arranged for a replay here. You’ll be surprised at how much you may be leaving on the table.
As always, if you have any questions for us, send them to Feedback@GreySwanFraternity.com.
