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Find The Best Inflation Hedges And Hang On

By Louis Navellier. Originally published at ValueWalk.

Inflation Hedges commodity prices Stagflation Energy Prices Recession-Level Selling Hyperinflation inflation

In his Daily Market Notes report to investors, while commenting on inflation hedges, Louis Navellier wrote:

Q4 2021 hedge fund letters, conferences and more

Be Unafraid

So the biggest news right now is the yield curve has inverted itself twice this week. Not that long ago, the two-year was higher than the five-year yield. And this morning before the market opened, the five-year yield rose above the ten-year yield.

So we have dramatically rising interest rates, but we also have a remarkably flat to slightly inverted yield curve. Now all the talk is the Fed might move in 50 basis point increments instead of 25 basis point increments. And all this got stirred up by St. Louis President James Bullard, who called for the Fed to raise rates to the 3% level.

Inflation Plays

It’s an inflationary environment. Clearly, Wall Street wants inflation hedges. We’ve pivoted and went into several of these inflation hedges: shipping, steel, fertilizer, crude oil and food stocks. And of course, we like all those semiconductors that are profiting from the chip shortage and will continue to prosper.

It’s a scary time for a lot of investors. But I don’t think you should be scared. I think investors should find the best inflation hedges and hang on. 

Avoid Banks

I want to remind investors that banks are not good investments in a flat yield curve environment. The last thing you want to do is own financials with flat or inverted yield curves.  I used to help merge banks together because when the yield curves were inverted in late 70s, early 80s, they didn’t make money.

Policy-wise, the main goal is to avoid a recession and it’s a real close call right now. The Atlanta Fed is estimating U.S. GDP growth of 1.3% for this quarter but we’ll see that number is going to keep changing.

We’re going to continue to benefit from quarter-end window dressing.  I expect a pause in early April and then I expect mid-April to be every stock for itself as those first quarter earnings announcements come out. 

Coffee Beans

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