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Investors may be woefully unprepared for inflation

05-20-2021 2:23 PM By Blair Harris

Investors may be woefully unprepared for inflation

According to The Wall Street Journal's James Mackintosh, investors are "woefully unprepared" for inflation.


Mackintosh notes the evidence for a generational shift is strong across five fronts which should combine to drive up wages and prices: Central banks are less concerned about inflation, governments are more willing to spend, globalization has peaked, birth rates are declining, and labor rights are strengthening.


Mackintosh summarizes his position stating, “It is too soon to go all-in on the idea that inflation is inexorably headed higher. But it would be crazy to build a portfolio that didn’t consider inflation a major risk.”


With Mackintosh’s perspective in mind, it is worth reiterating what we wrote in our last blog: According to the World Gold Council, “Gold has long been considered a hedge against inflation and the data confirms this. The average annual return of 11% in US dollars over the past 50 years, has outpaced the US and world consumer price indices (CPI).” Further, “In years when inflation was higher than 3%, gold’s price increased 15% on average.” 


Mackintosh summarizes his position stating, “It is too soon to go all-in on the idea that inflation is inexorably headed higher. But it would be crazy to build a portfolio that didn’t consider inflation a major risk.”


If you are concerned with inflation, market corrections amid already high equity valuations, budget deficits, or other environmental factors which may adversely impact your personal investment portfolio, it may be time to acquire some gold.

 

Sources:

World Gold Council, Gold Hub (2021 February 16) “The relevance of gold as a strategic asset”. Retrieved from: https://www.gold.org/goldhub/research/relevance-of-gold-as-a-strategic-asset-2021

Mackintosh, J. (2021 May 5) “Everything Screams Inflation”. Retrieved from: https://www.wsj.com/articles/everything-screams-inflation-11620163599

Image: The Harris Company, Saratoga Springs, NY

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