Rising Inflation: How Should Investors React?
Gold and oil are good hedges against inflation. While gold usually outperforms, if inflation rates rise along with interest rates, it might gain as much.
An improving economy suggests that “good inflation” is here to stay. However, the Fed has to ensure that the economy doesn’t overheat.
Commodities are a good hedge against inflation. Most commodities–except precious metals–including oil and food produce are a source of inflation.
Higher inflation erodes the value of future coupon payments. Inflation has more of a negative effect on bonds with later maturities.
As oil prices bottomed out in early 2016, inflation started to take off. Headline inflation was at 2.5% in January—near a five-year high.