Inflation Hedge: Not Stocks, Not Bonds, Not Crypto, Not Precious Metals

Inflation remains the most worrisome factor among economists and among families — and yet reputed inflation hedges are just not what they used to be. To beat an 8.3+% consumer price index rise, an investor would be looking for a 9% return, at least. Unfortunately, none of the old, classic recommendations are getting there.

According to the U. S. Bureau of Labor Statistics, the 12-month percentage change of the “all items” CPI in September, 2022 came to 8.3%. This, even though the gas-at-the-pump prices have been coming down. Which of the inflation hedges would allow investors to stay ahead of the game?

Let’s start with stocks. Here’s the daily price chart of the S&P 500:

The index started the year up there at 4800 and, after dipping to as low as 3650 in June, now trades for 3946. That’s a 17.8% drop in 8 and 1/2 months. The S&P 500 is not making any inflation hedge lists so far this year.

What about other stock market indexes? Here’s the daily price chart for the NASDAQ


It started the year at 16500 and the price is now 12134, so that’s 26% lower. The index, widely followed because it tracks so many of the most celebrated tech stocks, is definitely not keeping up with inflation.

What about bonds since stocks are obviously not working? Here’s the daily price chart for the benchmark iShares 20+ Year Treasury Bond ETF:

The bond ETF kicked off 2022 at 142 and now trades for 108. That’s a loss of 24% so far. Imagine the pain being felt right now by those investors holding the classic 60% stocks/40% bonds portfolio — often suggested by MBA’s working for highly-regarded investment firms.

Cryptocurrencies have been proposed as an inflation hedge, months and months ago. This is the bitcoin daily price chart:

It doesn’t quite show on this chart but bitcoin started the year at 42,500 and the current price is 20,026. That’s a 52% drop. Once marketed as an inflation hedge, this one is not living up to that marketing.

The old-school inflation hedge is a yellow precious metal. Here’s the daily price chart for the SPDR Gold Shares:

If you had purchased at the beginning of the year, your price was 168. After a March blast up to above 192, the shares now go for 156. That’s a 7% loss, better than the stocks, bonds and the bitcoin, but still a loss so far for 2022.

It’s been a tough year for those investors looking to do better than the rate of inflation. Will the Fed’s coming increases in interest rates improve the situation? We won’t know for months.

Not investment advice. For educational purposes only.

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