Here are some ideas for keeping your investments afloat in the rising tide of inflation.
getty
On December 14, 2021, the Bureau of Labor Statistics (BLS), released data about a significant increase in the Producer Price Index (PPI), the largest increase since the data was first calculated in November of 2010. For the 12 months ending November 2021, the PPI was up 9.6%. PPI is important because it measures the average change in prices received by producers for many products and some services. As the chart below illustrates, there is no question we have some form of inflation. The question is. How do we play defense?
PPI is increasing sharply, what can we do to offset rising prices?
U.S. Bureau of Labor Statistics
Why Inflation Matters. Inflation is critical to our retirement planning considerations because it sets our ‘real rate of return’, or what we make after inflation. So, if our portfolio is making 3% and inflation is 3%, we are standing still. If inflation is 6% and we’re making 2%, we’re going backwards. Here’s a chart from the Fed to show the Treasury rate minus CPI. Note that we’re in the negative territory:
The FED illustrates the fluctuation in the Treasury Rate minus CPI.
Federal Reserve of St. Louis
Components matter. Inflation has been with us about as long as money has existed. Inflation is a measure of purchasing power. Traditionally, there are three versions of inflation: Demand-pull, where there is more demand than production capacity (think cars both used and new, or houses); Cost-push, where the cost of raw materials increases prices (e.g., steel being up several hundred percent); or Built-in, where wages rise as prices rise (real wages are up as a result of the employment situation). For 2022, it appears all three types are present. Whether this is ‘sticky’ or ‘slippery’ (or both) remains to be seen. In either case, we should consider defensive tactics.
Defense, defense. There are a variety of ‘normal’ defensive tactics for inflation investing. These include:
· Treasury Inflation Protected Securities (TIPS)
· Gold
· Small Cap Stocks
· Natural resources
· Real estate
TIPS: Standard Defense. This solution, invented specifically for the purpose of offsetting inflation, is called Treasury Inflation Protected Securities (TIPS). According to Treasurydirect.gov, “Treasury Inflation-Protected Securities, or TIPS, provide protection against inflation. The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index. When a TIPS matures, you are paid the adjusted principal or original principal, whichever is greater. TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal; so, like the principal, interest payments rise with inflation and fall with deflation.” In short, a TIPS is a Treasury Bond that is indexed to inflation, where the principal is adjusted to reflect increases or decreases based on the CPI. TIPS pay interest twice a year, and the interest is based on the adjusted basis, so it can vary.
The coupon rate doesn’t change, but the payment does. Individual TIPS are available direct from the Treasury or are most often bought through a fund or ETF. This sounds easy, so why wouldn’t everyone hedge inflation with TIPS? The answer is ‘negative yield curve’. As of 12/15/21, a 5-year TIPS had a yield of -1.41%, while a 30-year had a negative yield of -0.35%. The negative yield is attributed to the rate on regular treasury bond being lower than the rate of inflation. So, holding individual TIPS will protect against inflation if they are bought directly from the Treasury and held to maturity. On the other hand, a TIPS fund or ETF can buy or sell TIPS at any time, causing the prices to be volatile. As of 12/15/21, the 10-year performance of the iShares TIPS Bond ETF was 3.26%.
Small, But Mighty Bonus: I-Bonds. Another inflation-protected Treasury security with some strong inflation-protection properties is the I-bond. Unlike a TIPS, an I-bond pays interest based on a fixed rate plus the rate of inflation. As of 12/15/21, I-bonds pay an initial interest rate of a remarkable 7.12%. This rate is good through April 2022. I-bond interest is federally taxable, but not subject to state and local income taxes. You can cash them in after 1 year at face value. If you cash them before 5 years, you lose 3 months of interest. They can be bought electronically through Treasury Direct, up to $10,000 per calendar year.
Gold: All That Glitters. Gold is historically regarded as an inflation hedge, although it is probably better characterized as a currency hedge. There are a number of ways for investing in gold, ranging from the base metal, or an ETF that buys the base metal like GLD; to buying gold mining stocks or a fund or ETF that buys miners. But is it a hedge? On August 15, 1971, Richard Nixon announced that he had taken the US off the gold standard. Since that time, we’ve had some serious bouts of inflation. According to a study by Robert Arnott, gold sometimes worked and sometimes didn’t:
See how returns for commodities, REITs, and gold stack up during inflationary periods.
Morningstar Direct
During the 1973-79 timeframe. Gold handily outperformed inflation, REITs, and Commodities. However, in the next two rounds, 1980-84 and 1988-91, gold actually has a negative return during inflationary periods. If we measure from the time the US dropped the gold standard, Gold returned, from 1971-2019, 10.61%, slightly less than stocks or commodities. For a fun look at gold over 3,000 years, have a look at Claude Erb’s paper.
Small Cap Stocks. The theory here is simple: small companies are more nimble and can pass on price increases to customers more easily. History seems to bear this out when we compare inflation-adjusted returns from 1969:
See how Large Cap, Small Cap, Corporate Bonds, and 30 Day T-Bill returns stack up over time from … [+]
Ibbotson & Harrington
Natural Resources. Natural resources are also widely considered an inflation hedge since raw material price increases tend to correlate with inflation. There is a difference between the underlying commodities and commodity producers. Producers tend to behave more like stocks. In the 1973-79 high inflation period and in 1988-1991, commodities outpaced inflation. In the period 1980-1984, commodities had a positive return, but failed to keep up with inflation.
Real Estate: They Aren’t Making Any More of It. In each of the three higher inflation periods in the last 50 years, only Real Estate Investment Trusts (REITS) have provided a return greater than inflation. Real estate rents and real estate values tend to rise in inflationary times, which gives a REIT a steady cash flow stream. REITs can be invested in though the REIT itself, or through a fund or ETF. REITs have special tax treatment as well, which can change the after-tax return in taxable accounts.
Bottom Line: Diversify. Whether we are in a period of sticky or slippery inflation (or both), diversifying makes sense. Remember to rebalance your portfolio, maybe shifting some weight to small caps, real estate, and commodities. Also, don’t forget the I-bond: 7.12% on a government security is pretty darn good. As always, I’ll try to answer questions: llabrecque@sequoia-financial.com.
levofloxacin 250mg usa levaquin 500mg oral
order avodart for sale flomax canada purchase ondansetron without prescription
buy spironolactone 25mg buy fluconazole 200mg online oral fluconazole 200mg
buy acillin without prescription ampicillin over the counter erythromycin 250mg ca
fildena 50mg generic buy generic robaxin 500mg methocarbamol uk
cost suhagra sildenafil 50mg pills order estradiol for sale
order lamictal 200mg generic vermox price tretinoin online
tadalis 10mg price order avanafil 200mg pills purchase voltaren sale
generic indomethacin 75mg indomethacin usa brand amoxicillin 250mg
cialis 10mg drug cialis 20mg tablets cheap sildenafil pill
order generic arimidex 1 mg Canada viagra generic sildenafil online
cialis sans ordonnance en pharmacie sildenafil 100mg en ligne acheter 25mg gГ©nГ©rique viagra en france
tadalafil 20mg kaufen ohne rezept cialis 10mg für männer viagra 100mg für frauen
buy provigil 100mg online cheap acetazolamide 250mg tablet order diamox 250 mg
doxycycline pills lasix us order furosemide 100mg pill
buy altace 10mg buy generic temovate buy generic azelastine
clonidine 0.1mg generic buy meclizine online cheap tiotropium bromide 9 mcg cost
buspar over the counter ditropan 5mg cheap oxybutynin 5mg brand
buy terazosin 1mg for sale order arava 20mg online azulfidine 500 mg tablet
fosamax pill ibuprofen 600mg drug order generic famotidine
olmesartan 10mg over the counter generic diamox acetazolamide order
tacrolimus 1mg generic labetalol canada order generic urso 150mg
order isosorbide pill imuran drug telmisartan 80mg price
zyban online order bupropion oral buy quetiapine pill
molnupiravir 200mg sale buy generic naprosyn 500mg purchase lansoprazole generic
buy zoloft for sale Order viagra usa sildenafil canada
order imuran 100 mcg sildenafil generic sildenafil 100mg canada
cialis 10mg buying viagra in london order viagra 50mg online cheap
cialis tadalafil 5mg cheap cialis sale symmetrel drug
revia 50mg usa buy naltrexone online cheap buy aripiprazole 30mg sale
medroxyprogesterone 10mg canada order medroxyprogesterone 10mg generic periactin online order
order provigil 200mg modafinil 100mg generic ivermectin for human
purchase luvox buy ketoconazole generic glipizide pills
buy isotretinoin sale purchase deltasone deltasone 20mg drug
piracetam without prescription order nootropil sale order sildenafil
buy zithromax without prescription prednisolone 20mg price order neurontin 800mg online
cialis generic sildenafil 100mg us viagra 200mg
lasix 100mg us purchase furosemide for sale order plaquenil 200mg generic
cialis 5mg over the counter buy generic betnovate 20 gm order clomipramine for sale
aralen ca chloroquine pills olumiant pills
metformin 500mg cost buy metformin 500mg online cheap cialis 10mg drug
olanzapine 10mg for sale nebivolol order online purchase diovan online
buy norvasc 10mg online cheap buy amlodipine online cialis 5mg pills
order clozapine clozaril tablet order decadron 0,0,5 mg generic
sildenafil mail order lisinopril cost brand lisinopril 2.5mg
order omeprazole 20mg online cheap real poker online gambling game
linezolid cheap play casino games for cash doubleu casino
metoprolol pill lopressor 100mg uk buy levitra 10mg
custom dissertation write essay service no deposit bonus codes
order levitra 10mg online methylprednisolone pills medrol brand name
buy essay now custom dissertation sildenafil australia
order clomiphene 100mg for sale blackjack games free poker online games
tadalafil 10mg drug viagra pill cost sildenafil
triamcinolone 10mg pills loratadine pills oral desloratadine
dapoxetine 90mg tablet synthroid 75mcg usa buy synthroid 75mcg online cheap
buy cialis 10mg for sale viagra 50mg oral levitra or viagra
cheap orlistat 120mg orlistat pills zovirax 800mg brand
tadalafil 10mg cheap order clopidogrel generic buy plavix 75mg online cheap
zyloprim price order crestor 20mg ezetimibe buy online
buy domperidone 10mg online motilium cheap buy flexeril 15mg online
cost cozaar 25mg cheap topamax 100mg topiramate buy online
order ozobax buy tizanidine 2mg online cheap toradol tablet
imitrex 50mg pill sumatriptan 25mg cost avodart 0.5mg pill
buy generic colchicine gloperba sale play slots for real money united states
zantac for sale meloxicam 15mg sale cheap celecoxib
play blackjack casino games online slot games free world series of poker online
buy tamsulosin 0.4mg sale zofran order online order aldactone 100mg generic
us cialis sales cheap cialis without prescription cipro order online
zocor 20mg cost buy generic valtrex buy proscar 1mg online
flagyl cost buy generic bactrim trimethoprim without prescription
fluconazole 200mg pills sildenafil 100mg sale order sildenafil 100mg
order keflex without prescription buy erythromycin 500mg pills buy erythromycin 250mg online
tadalafil india order tadalafil 5mg without prescription buy viagra 100mg online cheap
viagra pills 25mg viagra 100mg england tadalafil online order
ceftin pill buy cefuroxime 500mg for sale robaxin 500mg drug
online casino slots slot machine generic tadalafil 40mg
buy desyrel 50mg without prescription sildenafil 50mg sale buy sildenafil 50mg online
affordable term papers oral stromectol 6mg buy stromectol usa
sildenafil 150 mg buy lamotrigine 200mg sale cost lamictal 200mg
buy prednisone 10mg generic prednisone 20mg without prescription order amoxil 500mg online cheap
rx pharmacy online viagra buy cialis 20mg sale buy tadalafil 5mg
casino games buy tadalafil 5mg for sale female cialis cvs
casino free spin online slots for real money brand modafinil 100mg
lasix 40mg for sale doxycycline sale plaquenil pills
fildena online buy budesonide pill budesonide price
deltasone 20mg pill prazosin pills brand mebendazole
brand retin purchase tadalafil sale buy avanafil
buy tadacip 20mg online tadacip 20mg pills order indocin 50mg generic
terbinafine 250mg ca trimox over the counter trimox 500mg sale
biaxin 250mg canada brand antivert 25mg brand meclizine 25 mg
naproxen 250mg brand cefdinir online buy lansoprazole 15mg pills
spiriva 9 mcg usa order terazosin 5mg pill purchase hytrin sale
buy generic albuterol 100 mcg purchase cipro for sale cipro usa
pioglitazone order actos 30mg over the counter cheap viagra tablets
singulair 10mg canada montelukast 5mg drug sildenafil 50mg canada
cialis 20mg ca Cialis delivered overnight online blackjack for real money
cialis pharmacy over the counter erectile dysfunction pills tadalafil buy online
free casino games wind creek casino online play casino free spin
ivermectin new zealand stromectol brand buy avlosulfon 100 mg online
play blackjack online casino real money paypal free online blackjack
free online slot machines online pharmacy meds custom research paper writing
nifedipine 30mg over the counter perindopril 4mg pill order generic fexofenadine 120mg
buy ramipril 10mg sale arcoxia ca order arcoxia 60mg without prescription
buy assignments azulfidine 500 mg cheap cheap sulfasalazine 500mg
cost doxycycline 100mg order generic ventolin inhalator buy generic cleocin
asacol 800mg us buy azelastine without prescription avapro 300mg cost
diamox drug isosorbide 40mg oral order azathioprine 50mg pills
buy generic clobetasol amiodarone over the counter order cordarone 200mg without prescription
lanoxin over the counter micardis online molnunat 200 mg pill
amoxil tablets buy stromectol 3mg online ivermectin 200
carvedilol 6.25mg brand ditropan online elavil online buy
order alendronate online cheap buy nitrofurantoin 100 mg online order ibuprofen 400mg sale
order indocin online buy indomethacin capsule oral cenforce 50mg
buy pamelor 25 mg online buy paroxetine 10mg generic paxil 10mg ca
order famotidine 20mg without prescription order tacrolimus online cheap buy mirtazapine sale
buy tadalafil 20mg online buy trimox 250mg without prescription order generic amoxicillin 500mg
purchase ropinirole sale calcitriol 0.25mg tablet labetalol price
purchase esomeprazole buy furosemide 100mg without prescription order furosemide 40mg generic
tricor buy online sildenafil 100mg tablets buy sildenafil online
minocycline 50mg brand terazosin drug terazosin pills
cialis coupon viagra buy online cheap viagra pill
glycomet cheap buy nolvadex generic buy tamoxifen 10mg sale
cialis price costco best ed drug herbal ed pills
oral clomiphene 50mg buy prednisolone 20mg for sale cheap prednisolone 40mg
provigil 200mg without prescription order phenergan phenergan canada
cheap accutane 20mg order ampicillin 250mg generic ampicillin 250mg usa
prednisone over the counter order amoxicillin 250mg online cheap buy amoxil 1000mg generic
ivermectin 6 buy stromectol 3mg generic deltasone 10mg cheap
order fildena generic order pregabalin online propecia online buy
accutane 40mg brand buy amoxicillin pills buy azithromycin 250mg pills
zofran 4mg drug purchase ondansetron for sale buy bactrim pills
purchase ventolin inhalator order synthroid 150mcg generic augmentin 1000mg tablet
cost prednisolone 5mg purchase prednisolone furosemide 100mg tablet
provigil sale buy lopressor 50mg online order lopressor online
good essay writing websites help with writing an essay instant essay writer
what is the best custom essay site i need help with my essay essay on community service
oral doxycycline 100mg order levitra 10mg pills buy zovirax sale
best essay writing company write my law essay buying an essay
dutasteride usa avodart pill order xenical 60mg online
thesis sentence argumentative essay thesis a cruel angel’s thesis lyrics
how to write a strong thesis college thesis thesis editors
inderal over the counter buy diflucan 200mg without prescription purchase coreg generic
oxybutynin generic oxcarbazepine sale oxcarbazepine 600mg pills
how to write thesis writing with a thesis cruel angel’s thesis
buy azathioprine 25mg without prescription buy naproxen 500mg online buy naprosyn 500mg pills
sample thesis paper help me write a thesis the thesis statement in a research essay should
simvastatin 10mg ca zocor 20mg usa sildenafil 50mg
brand omnicef 300mg order lansoprazole 15mg generic protonix tablet
dapsone online buy buy atenolol 50mg pill brand tenormin
alfuzosin for sale generic desyrel 100mg diltiazem tablet
viagra online buy viagra 100mg usa buy cialis 5mg sale
ezetimibe drug order methotrexate 10mg sale buy methotrexate 5mg online cheap
buy promethazine 25mg for sale buy phenergan pills tadalafil without prescription
how to buy warfarin reglan 20mg without prescription buy allopurinol 300mg online
order levofloxacin pill actigall 150mg over the counter order zyban 150 mg pills
generic cetirizine order sertraline generic sertraline us
cenforce 100mg cheap order aralen 250mg pill order metformin 1000mg without prescription
tadalafil for sale in canada how much tadalafil tadalafil performance anxiety
schnucks pharmacy hours pharmacy shelving westfield pharmacy
buy escitalopram 20mg without prescription fluoxetine 20mg generic buy naltrexone 50mg sale
sildenafil 100mg price per pill sildenafil maximum dose per day sildenafil class of drugs
brand atorvastatin 10mg viagra buy online brand viagra pills
letrozole 2.5 mg ca buy cheap generic letrozole viagra professional
can you mix tadalafil and sildenafil cialis tadalafil 5 mg lilly tadalafil muscle growth
vardenafil vs tadalafil https://justtadafilix.com/ tadalafil good rx
cialis 5 mg cialis online order buy ed medications online
viagra online prices https://ethvigrix.com/ purchase generic viagra in canada
30 mg viagra https://leepvigras.com/ generic viagra 100
buy ivermectin for humans australia order stromectol 3mg generic isotretinoin 10mg us
where to buy cialis https://crocilismen.com/ purchase cialis
provigil 200mg cheap purchase promethazine generic prednisone over the counter
discount viagra usa https://foxviagrixed.com/ sildenafil buy canada
cialis 5mg cost per pill https://hdcillis.com/ cialis free coupon
purchase amoxil online cheap zithromax price where to buy prednisolone without a prescription
viagra 123 pills 7000 mg https://ac3vigra.com/ viagra 100 mg price in usa
generic accutane 40mg cost azithromycin 500mg zithromax 250mg without prescription
order neurontin 100mg for sale order furosemide 100mg sale buy cheap doxycycline
cialis efectos secundarios https://hippharmo.com/
order cialis brand https://uhdcilise.com/ tadalafil liquid review
purchase clomid pills plaquenil 400mg oral hydroxychloroquine ca
where can i buy female viagra in india https://vivigrix.com/ viagra for sale canada
cialis 800 https://hoscillia.com/ coupons for cialis 5mg
buy generic doxycycline for sale buy augmentin for sale buy augmentin 1000mg pills
order synthroid 75mcg clomid 100mg for sale levitra where to buy
glycomet 500mg over the counter order atorvastatin for sale order norvasc 5mg generic
order biltricide 600 mg generic hydrochlorothiazide drug cyproheptadine drug
purchase lisinopril sale omeprazole 20mg drug buy lopressor 50mg without prescription
methotrexate 2.5mg drug cheap methotrexate 5mg reglan over the counter
order orlistat 60mg online cheap buy orlistat 60mg cheap allopurinol 100mg
purchase losartan pill order cozaar 25mg online cheap generic topamax 100mg
order rosuvastatin 20mg for sale ezetimibe 10mg us motilium sale
sumatriptan tablet buy sumatriptan 50mg for sale order avodart sale
brand sumycin buy sumycin 250mg generic purchase baclofen pills
ketorolac tablet ketorolac pills inderal 10mg brand
zantac 300mg uk purchase mobic without prescription cost celebrex
plavix 75mg cost brand luvox order nizoral 200 mg generic
order flomax generic buy generic ondansetron aldactone 25mg canada
purchase cymbalta pills glucotrol sale piracetam tablet
order betnovate for sale buy itraconazole 100 mg without prescription buy sporanox generic
purchase progesterone generic buy generic progesterone online buy olanzapine 10mg sale
order nateglinide 120 mg without prescription order candesartan 16mg buy candesartan without prescription
purchase bystolic generic order bystolic 5mg pill clozapine oral
cheap tegretol 400mg purchase ciprofloxacin sale buy lincocin 500 mg generic
order duricef pills epivir ca buy proscar 5mg sale
order tadalafil 20mg generic buy cialis low price best viagra sites online
cheap diflucan 200mg order ampicillin for sale ciprofloxacin 1000mg cost
estradiol 2mg cost how to get lamotrigine without a prescription purchase minipress for sale
purchase flagyl without prescription trimethoprim generic order keflex 500mg generic
buy cheap generic vermox order mebendazole 100mg pill purchase tadalis online cheap
buy clindamycin pills for sale order cleocin 300mg pill sildenafil 50mg without prescription
indocin canada cefixime 200mg usa order generic cefixime 200mg
order amoxicillin 250mg for sale order biaxin without prescription clarithromycin 250mg for sale
order clonidine 0.1mg pill clonidine us spiriva cost
purchase suhagra online cost aurogra buy generic sildalis for sale
order minocycline 100mg online order pioglitazone 30mg without prescription buy pioglitazone without prescription
buy arava generic leflunomide 20mg cost sulfasalazine 500mg brand
purchase isotretinoin online cheap zithromax 250mg pills zithromax 250mg pill
buy tadalafil 20mg without prescription 50mg viagra female cialis tadalafil
stromectol 3mg tablets where to buy ed pills buy deltasone online cheap
buy generic furosemide 100mg doxycycline 200mg for sale albuterol oral
cheap levitra 10mg buy levitra generic buy hydroxychloroquine 200mg pill
purchase levitra vardenafil over the counter order hydroxychloroquine 400mg sale
order mesalamine 400mg pills order azelastine 10ml online cheap buy cheap generic irbesartan
buy benicar without prescription purchase olmesartan sale brand divalproex 250mg
temovate over the counter buy cheap clobetasol amiodarone online order
diamox price order imuran 25mg without prescription purchase imuran sale
cheap digoxin 250 mg lanoxin 250 mg for sale where to buy molnunat without a prescription
purchase naprosyn for sale buy lansoprazole 15mg online buy prevacid 30mg for sale
carvedilol price order cenforce 50mg for sale cheap chloroquine
generic proventil proventil cheap order phenazopyridine online
oral singulair 5mg buy dapsone 100mg generic dapsone pill