For months, inflation concerns have gripped financial markets as central banks and economies struggle to keep up with decreasing supplies and rising demand.
Investors saw the panic triggered by inflation since the US Federal Reserve has tried to calm these concerns every month.
Rising US bond yields helped to add another layer of complexity, with 10-year yields at multi-year highs.
Therefore, traders and investors are looking for ways to trade the market while avoiding being hit by inflation.
Here you can find several plays and angles to take. It includes assets that significantly benefit from a weakened US dollar and inflation.
The Basics of Inflation
In economics, inflation is considered a quantitative measure of the speed at which the average costs for a standardized basket of goods increase in a specific period. Inflation usually appears as a percentage while estimating the spending power of the currency.
Increasing prices is bad news for customers, as it takes an increasing amount of money to buy the same basket of goods and services year after year. This theory is mainly known as purchasing power.
Focus on Commodities
This statement includes commodities and precious metals, which have historically benefitted from mounting inflation. In particular, silver and gold routinely performed well during periods of inflation, with each representing a diverse perspective for traders.
Gold is a pure obstacle against inflation. Experts see that as a safe haven asset. Besides that, silver benefits from the weakness in the US dollar. It also happens while having the added upside as an industrial metal.
As a central component of new green technologies such as solar and electric vehicles, silver finds itself accurately in H2 2021 commodity listing.
Moreover, most investors are already familiar with the run on industrial commodities such as raw materials and base metals.
Steel, iron, copper, and other raw materials are all about to surge year-to-date, with the prospect for increased demand helping cover prices in the near- and medium-term.
These commodities might be a strong play looking forward as supply is currently nowhere close to the demand level. This process goes with economies re-opening from the Covid pandemic while industrial output is still not near its total capacity.
Energy Back in Play
Given the headlines of hostile oil prices a year ago, it seems difficult to believe, but the energy sector is back in play. Inflation helped this process to flow.
Presented as one of the best accomplishing sectors during periods of inflation, oil prices once again surged to more than $70 a barrel in the last month.
However, historically, this sector has been one of the biggest benefactors during a run on inflation. Besides, it played out during 2021.
The US Federal Reserve championed a steady approach in its ways of handling monetary policy. It is clear that inflation became a natural force that is not going away.
Oil’s immediate future looks bright with prices for fuel already high and the summer months approaching, typically a sign for increased demand.
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