hr: Money

Everyone knows that our income is meant to be spent. In fact, consumer spending accounts for two thirds of economic growth. With that figures, a change in consumer behaviour could even create a recession. But how do we properly allocate our personal resources to meet our desired objectives in an environment where there is high inflation?

1.    Commodities

Commodities is not only inversely proportional to the greenback, but also it is considered a hedge against inflation as commodities itself creates inflation. Take a look at Gold; gold was playing at $700 an ounce last year until recently where it hit a high of $1030 an ounce. If you were hedging yourself from the depreciation of the greenback back then and you bought Gold, you just not only purchased your portfolio an insurance policy against inflation, but you may have also made a lot of money with the Gold play.

2.    Bond Markets

When people are scared and are running away as fast as they could on equities, people do tend to prefer fixed income which also a symbol of capital preservation over the equities market or maximum growth potential. This has been proven with the Bond Rally of the 1970s where yields went at their records. So when fear is the market’s sentiment, stay on the sidelines or switch to fixed income.

Let’s face the fact that recession is part of the economic cycle. And what we need to do is not to blame the markets for our own mistakes but adjust our sails with the wind. In this kind of environment, my mentor would always reiterate that “Cash is always King”.