Stocks are set to soar because of inflation. It’s hard to not to notice the jump in consumer prices. Everything from groceries to gasoline costs more.
But where’s the proof? We need data. Okay, not a problem. Let’s look at two factors: wages and debt.
Wages
Check out the Economic Policy Institute wage tracker. Here you will find wages have been lagging inflation for some time. No doubt, this means more people are feeling the pinch everyday while their wallets get squeezed by rising prices.
To simplify the concept of inflation, think of it as stealth theft. You don’t see it happening, but you know something is going on.
For sure, the concept of inflation is a tough nut to crack. However, if you are fortunate enough to have savings, understanding how to defeat inflation is a top priority.
But, there is one more piece of the puzzle.
Debt
I’m not talking about household debt, like mortgages and stuff like that. I’m talking about government debt. More importantly, how it’s created.
Enter the concept of Quantitative Easing(QE). Or, the practice of creating money out of thin air to pay for whatever. Also, ultra low interest rate policies underpin the entire process of debt creation.
This is a chart of the debt created by the The Federal Reserve. In the past 12 years debt has grown by approximately 815% to $8.9 trillion.
Surely, if you combine low interest rates by design with QE and you have a recipe for inflation.
As stated above, if you are fortunate enough to have savings, understanding how to defeat inflation is a top priority.
Conclusion
In the end, wages and debt determine the level of inflation. For now, wages are not keeping up with inflation, not even close. Of course, if you combine weak wages with out of control debt creation, is it really surprising we have an inflation problem? Probably not.
So, what should you do? Well, the obvious thing to do is make sure your savings grow faster than inflation. To achieve this task, certain asset classes fit the bill.
- stocks
- commodities
- Bitcoin and Ethereum
- real estate
- gold and silver
Others do not:
- bonds
- cash
In the final analysis, having the right mix between winning and losing assets classes is key. Fortunately, the list of asset classes to avoid is relatively small.
Be sure to check out the Ultimate Portfolio + page. Here you will find great stocks that are beating inflation big time!
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