These are the best investments against inflation, according to the analysis of the returns of the last century

For months, inflation has covered the front pages of national and international newspapers. In Spain as in the United Kingdom, the inflation rate is currently at 6.1% and 5.5%, respectively. Namely, at 30 year highs. In the case of the United States, at 7.5%, it is the rate of inflation highest in the last four decades. Given this scenario, many doubt what are the best investments to deal with inflation.

Ray LeVitre, founder of the Net Worth Advisory Group in Utah, USA, believes he has found the answer. After analyzing the main inflation peaks that have occurred in the last century, LeVitre points out that most were short-term events, often followed by strong rallies.

Among the periods analyzed, the 1970s stands out. Between 1973 and 1982, the annual inflation rate never fell below 5.8%. In four of those years, it exceeded 10%. LeVitre decided to focus on this particular period to see what lessons from the past can be applied to the current situation.

The founder of the Utah Net Worth Advisory Group analyzed the behavior of different investment systems during an inflation spike. In the first scenario, a $10,000 investment, spread across large-cap and small-cap stocks, would have shrunk by $3,935, or 40%, over the course of two years. However, then it would have started to come back. Although it would take four years to recover the initial value of the investment, in 1982 it would have doubled to reach $22,827. With this system, the investment would be only 111 dollars away from equaling inflation. and avoid loss of purchasing power.

In the second scenario, that of having invested the $10,000 exclusively in a combination of bonds, investors would have been $1,275 behind inflationas published USA Today. Finally, if they had distributed the 10,000 between shares and bonds at 50%, this system would have allowed them beat inflation with an advantage of almost 210 dollars.

The conclusions of Ray LeVitre’s analysis of this very problematic period suggest that the returns of each of these assumptions would have been quite similar, keeping pace with inflation with small margins of difference.

inflation in Spain

Although at first the price increase was focused exclusively on energy, now inflation has spread throughout the consumer basket. Meanwhile, the producer price index, oil and core inflation suggest that the worst could still be to come. Inflation will hit highs not seen since 1990 in February and will continue to expand.

The drop in inflation in January has been the consequence of a drop in electricity, which has offset the rise in core inflation, they point out from Funcas. And it does not represent a change in trend: in February, inflation could resume its upward trend with a rise of one point or more in year-on-year terms.

Max Ventura Bolet, an economist at CaixaBank Research, explains in a note that “63% of the basket already exhibits inflation rates above 2% while 26% of the basket is already above 5%”. In annual terms, pasta has become more expensive by 20%, olive oil by 30.1%, hotels and accommodation services by 18.1% and sheep and goat meat by 12.6%. It should be noted that energy continues to be the one that contributes the most with increases of more than 30%.