Inflation has hit a nearly 40-year high. 7 financial experts tell us the stocks and other investments they favor during periods of high inflation

If you feel like you’ve been paying more for everything from food to tech products, you’re onto something: In December, consumer prices rose 7% from a year prior, which is the highest U.S. inflation rate in almost 40 years. “Inflation has soared due to strong customer demand and ongoing labor and supply shortages. While price pressures are likely to ease in 2022, economists estimate the rate of inflation will probably exceed 3% by year end,” MarketWatch’s Jeffrey Bartash reports. So we’ve asked finance experts and financial advisers how they advise clients to invest during times of inflation:

Consider value stocks in the consumer staples space, says Snigdha Kumar, head of product operations for Digit

“Investors should continue to be invested in equities, as stocks generally hold up better during times of inflation especially if inflation comes with growth. Value stocks that are in the consumer staples space like food and energy do well during inflation because demand for staples are inelastic and that gives these companies higher pricing power as they are able to increase their prices with inflation better than other industries.” 

Opt for stocks and TIPs, says Leanne Devinney, vice president of Fidelity Investments

“It’s a good strategy to diversify across different types of investments. For instance, stocks more than bonds tend to keep up with inflation over time. Also consider different types of inflation-resistant fixed income investments, such as Treasury Inflation-Protected Securities (TIPS) and high-yield bonds. It may also help to reduce exposure to investments that are more sensitive to inflation, such as certain treasury bonds.”

Change up how you deal with your cash, says Pamela Chen, chartered financial analyst at Refresh Investments

“During inflation, it becomes more important to invest cash. As prices for goods increase during inflationary periods, cash will lose purchasing power and one dollar will buy less than before. Invest your cash to earn a return to minimize the inflationary bite, or possibly earn a return that keeps up with or exceeds the inflation rate.” 

Think about real estate and commodities, says Grace Yung, certified financial planner at Midtown Financial Group

“Equities as an asset class have historically out-performed during inflation … Additionally, tangible assets such as real estate or commodities are also something to consider. For example, we have seen prices of building materials rise significantly recently. Investing in commodities such as lumber or steel would have worked as a natural hedge to inflation.”

Gold and REITs may make sense, says Alana Benson, investing expert at NerdWallet

“Inflation is just one more reason why it’s important to have a well-diversified portfolio. If your investments are spread across different asset classes, geographies and industries it can help protect you from risk. You can also explore investments that naturally hedge against inflation such as gold, TIPS and real estate. Real estate investment trusts (REITs) are an easy way for investors to gain access to real estate without having to actually buy any property themselves and since most REITs pay dividends, they can also offer a source of income.”

Look to high-quality companies that pay dividends and crypto, says Michael Wilkerson, executive vice chairman of investment holding company Helios Fairfax Partners

“In high inflation environments, cash, usually perceived as the safe asset, is the worst place to be as its purchasing power is steadily eroded. Look for high quality companies that are dividend payers or names that have a unique angle in the current environment. I like Prologis (PLD) as an infrastructure and supply chain leader, Marriott (MAR) as a play on reopening of economies and travel, and miners Rio Tinto (RIO) or Newmont (NEM) for commodities exposure and high dividends.”

He continues: “Look for gold to outperform only when everyone starts running for the hills. In the meantime, Bitcoin and Ethereum provide the most liquid ways to invest in crypto which may yet prove to be the most efficient inflation hedge in this environment.”

Use broad diversification, says Brittney Castro, certified financial planner at Mint

“You definitely want to be aware not to keep too much money in cash — checking, savings or high yield accounts — as these will not keep up with inflation since their rates of return average about 1% annually … Make sure you have a clear game plan and focus on long term investing strategies like dollar cost average, broad diversification, regular rebalancing, and then make tweaks along the way to address any changes in the economy or your current financial situation.”