Inflation has reached another multi-decade record…
In March, consumer prices were 8.5% higher than a year ago.
Energy, food, and shelter drove most of the increase.
Meanwhile, real earnings declined.
Which means that employees could buy less with their money than in 2021.
Consumers are getting poorer, prices are soaring, and some of the most important economic bottlenecks that stand in the way of growth are still present. Like the global supply chain challenges.
The truth is… it looks more challenging than some experts think.
The U.S. – and potentially the world – will experience hard times ahead.
And while the White House will be happy to blame everything on the war in Ukraine, there are bigger trends unfolding that could make the U.S. economy grind to a halt.
Today, I’ll tell you why… and offer investment ideas to help with the decline of your money’s value.
We Have Predicted Persistent and High Inflation
Back in July 2021, it was clear prices would continue soaring.
Quoting a research report, I wrote:
Inflation is here to stay. In fact, by 2025, annual inflation could reach 4%. That means 1/6th of your purchasing power could disappear.
That may not sound like a big deal. But remember, this compounds over time. If you have $10,000 in your savings account, you’re looking at losing about $1,600 in purchasing power by 2025.
Can you afford that?
Since then, inflation has been hitting one multi-decade record after another.
And 2022 is no exception.
None of the forces driving inflation up are gone. The energy supply is still tight… which translates into higher gas prices.
Plus… food, semiconductors, and even commodity prices are surging from supply-demand imbalances.
That’s good for the companies selling in-demand products, but consumers are suffering. And will continue to do so if the factors behind price hikes don’t change soon…
Inflation Could Cause a Recession
Higher prices are not “transitory,” as some Fed officials say. They are a result of deep economic problems and signal something dangerous…
An economic slowdown.
More drastically, a potential recession.
Just several days ago, the Bloomberg recession probability forecast jumped from 20% to 25%.
In the happy days of post-pandemic recovery, this indicator hovered around 10%. It has more than doubled since then.
The last time it was at this level was February 2020… and we know what happened next.
But we wouldn’t rely on just one indicator to tell us where the economy is headed.
Joe Biden’s top economic adviser said the country could face “difficulties” ahead, citing high inflation and supply chain issues.
Bloomberg Economics says that inflation in both the U.S. and the eurozone will likely stay above 8% in the coming months.
In other words, inflation might continue running at 40-year highs.
And this forecast could be conservative.
For instance, Bank of America announced in a note to clients that the “inflation shock” is worsening and a “recession shock is coming.”
Even in China, expectations are low. The country’s Premier Li Keqiang issued his third warning this week about risks related to economic growth.
All in all, the world is facing a challenging year. As an investor, you should prepare for a possible recession.
But you can also take advantage of some of the trends unfolding right now. In fact, one could help you protect your portfolio against both inflation and a recession.
“Hard Tech” Commodities Are My Number One Pick for 2022
In the past, commodities have generally been a good inflation hedge.
Gold and silver, often called “monetary metals,” served as safe havens during high-inflation periods.
But in the post-pandemic world, gold and silver aren’t the only options investors have.
For example, the group of commodities we call “hard tech” (used in applications such as 5G, electric vehicles, and electronics) may benefit from both inflation and a recession.
To illustrate, an ETF (exchange-traded fund) tracking the price of lithium has appreciated by 27% over the past year.
Also… the copper price has increased by about 15%.
Meanwhile, the S&P 500 rose by just 7%.
Looking ahead, both of these trends will likely continue. Broad markets might stay volatile… and commodities – especially the ones used in high-technology areas such as electric vehicles – could continue performing well.
To deal with inflation and recessionary risks, consider the Global X Lithium & Battery Tech ETF (LIT). It provides broad exposure to the lithium industry, from mining to battery production.
And it’s one of the best and easiest ways to profit from the “hard tech” megatrend.
Analyst, Casey Research