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President Donald Trump recently raised eyebrows after declaring, “I love the inflation” while discussing the latest inflation report (1) and the ongoing conflict involving Iran.
Speaking to reporters, Trump suggested inflation would fall sharply once the conflict ends, arguing that U.S. actions have helped prevent a much larger spike in oil prices. He claimed the U.S. has been quietly removing millions of barrels of oil from the market and predicted inflation would “come down like a rock” when the war is over.
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Whether that prediction proves accurate is still unclear. Even though inflation has cooled dramatically from its June 2022 peak of 9.1% (2), prices haven’t returned to where they were before the pandemic. Since January 2020, consumer prices have risen by roughly 29%, according to Bureau of Labor Statistics data (3) — meaning Americans are on the hook to pay substantially more for many everyday necessities.
At 4.2% inflation (4) year over year, prices double roughly every 17 years.
That means a retiree living comfortably on $50,000 per year today could need nearly $100,000 annually by the mid-2040s just to maintain the same lifestyle if inflation remained at current levels.
While politicians continue to argue where the economy is headed next, many Americans face a more immediate question: How can they protect their purchasing power if the cost of living remains stubbornly high?
Fortunately, several asset classes have historically performed well during inflationary periods and may even help diversify your portfolio when prices rise.
Test your metal
Gold doesn’t generate income like stocks or bonds, but that’s never been its primary appeal. The metal has historically held its purchasing power over long periods.
Gold’s reputation as an inflation hedge was forged during the 1970s — specifically after the Nixon shock of ‘71 (5) — when inflation surged into the double digits. Between 1971 and 1980, the price of gold climbed from roughly $35 an ounce to more than $800 (6) as investors sought protection from rising prices and economic uncertainty.
One way to invest in gold today that also provides significant tax advantages is to open a gold IRA with the help of Priority Gold.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainty.
To learn more, you can get a free information guide that includes details on how to get up to $10,000 in free silver on qualifying purchases.
Read More: Thanks to Jeff Bezos, you can become a landlord for $100 — without the headache of actually being one
Real income-generating assets
Real estate is another asset class often associated with inflation protection.
As prices rise across the economy, property values and rental income frequently rise as well. In many cases, landlords can pass some inflation-related costs on to tenants through higher rents, helping preserve returns.
Historically, real estate has generated income while also offering the potential for long-term appreciation, making it a popular diversification tool among investors seeking assets outside traditional stocks and bonds.
According to Federal Reserve data (7), the median U.S. home sale price has climbed from roughly $23,000 in 1970 to more than $400,000 today. While housing markets can experience significant downturns, real estate has historically benefited (8)[a] from both economic growth and inflation over extended periods.
If you’re more interested in the long-term earning potential of short-term stays, you can get into this market with as little as $100. Real estate platform Arrived offers you access to shares of SEC-qualified investments in rental homes and vacation rentals.
Backed by world-class investors like Jeff Bezos, Arrived makes it easy to fit these properties into your investment portfolio regardless of your income level. Their flexible investment amounts and simplified process allow accredited and non-accredited investors to take advantage of this inflation-hedging asset class without any extra work on your part.
You can view their full list of vetted properties, selected for their income-generating and appreciation potential and start investing today.
Fine alternatives outside traditional markets
In 1999, the S&P 500 peaked before the dot-com bubble burst in March 2000 and it took 14 long years for the market to fully recover.
Today, Goldman Sachs is forecasting just 3% annual returns from 2024 to 2034. It sounds bleak but not surprising: The S&P is trading at its highest price-to-earnings ratio since the dot-com boom. Vanguard isn’t far off, projecting around 5%.
In fact, nearly everything feels priced near all-time highs — equities, gold, crypto, you name it.
That’s why billionaires have long carved out a slice of their portfolios in an asset class with low correlation to the market and strong rebound potential: Post-war and contemporary art.
It may sound surprising, but more than 70,000 investors have followed suit since 2019 — through Masterworks. Now you can own fractional shares of works by Banksy, Basquiat, Picasso and more.
Masterworks has sold 27 artworks so far, yielding net annualized returns like 14.6%, 17.6% and 17.8%.*
Moneywise readers can get priority access to diversify with art: Skip the waitlist here.
*Past performance is not indicative of future returns. Investing involves risk. See important Regulation A disclosures at Masterworks.com/cd.
The platform acquires artwork, securitizes ownership and allows investors to participate in potential appreciation without needing to purchase an entire piece themselves.
Stay productive
While gold, real estate and art get some love during inflationary periods, it’s just as important to have everything balanced so you can stay afloat.
Businesses raise prices over time, helping revenues and profits keep pace with inflation. That’s one reason diversified stock portfolios have historically outperformed inflation over long investment horizons.
Imagine stuffing a $100 bill inside a jar and burying it in the backyard. Fast-forward 30 years, you go digging and, hey, you found your $100.
When you take that bill to the store, though, you’ll quickly find that you won’t be able to buy as much as you would have 30 years before.
That’s the quiet devastation innate to inflation. It doesn’t steal your paper currency per se; it steals what currency can buy. Over a standard 30-year career, even modest inflation rates of 3% will cut the purchasing power of your dollars by more than half.
So if you want to survive the next three decades, you can’t just save. You have to outrun the clock.
For investors unsure of the long-term move, working with a qualified financial advisor can help identify opportunities and build a strategy tailored to individual goals and risk tolerance.
Platforms like Advisor.com connect investors with vetted financial professionals who can help evaluate whether inflation-protection strategies make sense within a broader financial plan.
A professional advisor can also help you determine how many years you have left to invest before retirement and assess your comfort level with market fluctuations — two key factors in building the right asset mix for your portfolio.
Through Advisor.com, you can schedule a free, no-obligation consultation to discuss your retirement goals and long-term financial plan.
The future path of inflation remains uncertain. Trump’s prediction that prices will soon “come down like a rock” may or may not materialize.
In the meantime, maintaining a diversified portfolio that includes assets with different inflation sensitivities may help investors prepare for a range of economic outcomes, rather than relying on any single forecast.
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
YouTube (1); Urban Institute (2); Federal Reserve Bank of St. Louis (3), (7); Reuters (4); The New York Times (5); Federal Reserve Bank of Cleveland (6); National Bureau of Economic Research (8)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
