Your Equities Inflation Hedge Is in Trouble
A monitor displays S&P 500 market data on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, Dec. 31, 2021. The turn of the year is a crucial moment in picking stocks to hedge against rising inflation.
Photographer: Michael Nagle/BloombergHi, it’s Ed Harrison and I write about markets and policy for Bloomberg’s Markets Live. This is The Everything Risk, where each week I’ll unpack the web of risks for consumers and investors in a shifting markets landscape.
American households are feeling the pressure from inflation. You can see that because sentiment is at its worst level in a decade even though we just registered 3.8% unemployment. The big fear is that it could just get worse. The prospect of inflation hitting double digits, just like it did in the 1970s, is no longer unrealistic. But when I look at the investing environment of the 1970s, I find a lot to like. It turns out, there was a pretty good place to hedge for inflation — the stock market! There are caveats though. So, let’s talk about that and what the implications are for the current period.