Tuesday, April 12, 2011

How To Invest In The Inflation "Story".

The Fed's official line is that there is no inflation because while prices are rising, wages are not. I'm no expert, but isn't that the definition of stagflation? The cost of living rising while incomes are not?

Regardless, Sam Stovall and CNBC see inflation as more of a news story, but one that you can make money on nevertheless. Here's how..

Stocks experience a sector rotation when the CPI crosses the 4% increase threshold. We're under 3% now, so when reports start rolling in that the CPI is over 4%, go for inflation hedges and defensive stocks:

  • Energy
  • Materials
  • Utilities
  • Health Care
  • Consumer Staples

Makes sense to me. After all, perception is sometimes reality and you don't need inflation to be real to make money on these investments, you only need most of the market thinks it's real.

Watch the full interview here:


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