As a long-time stock analyst, I can't believe that is the conclusion that I have reached this year. Stocks have no chance of outperforming the kind of Carter-era type inflation that we are headed for right now.
I was around when interest rates hit 11.0% in 1979 when President Carter destroyed the economy. In the end, Volker had to step in as head of the Federal Reserve and jack up rates to destroy inflation.
Stocks didn't survive that. There was a stock market crash and then stocks languished for many years until the ruling party changed and more conservative policies were put in place.
That is likely what is going to happen with the stock market again. You can't massively increase spending, reduce incentives to work, and destroy capital without a correction in the stock market.
Surviving With Cryptos
The only assets that tend to survive this are non-correlated ones like real estate, timber, and in today's world, cryptos.
The truth is that many cryptos are basically hard to sell. It's hard to "puke your position" as Wall Street does (i.e., hedge funds) when everyone else is selling. Other than the most liquid ones like Bitcoin, Ethereum, and a handful of others, cryptos will likely not be as crushed during any kind of downturn.
Even if they do deteriorate, they provide a huge buying opportunity, even though it may take longer than usual to build a position.
But that is not even the main point. The idea is that with inflation looming, especially after last week's report of a 6.2% in October's CPI inflation. This was much higher than expected repeat of the prior month's 5.4% rate.
These numbers are very disturbing. If the market perceives that the supply chain crises and government spending don't get under control, inflation could begin spiraling out of control.
At that point, your stock market investments won't help you.
What To Do If Inflation Keeps Rising
The first to do is not panic. Don't sell on the first sign of trouble. Sometimes action by the Fed to quell an upswing in inflation is all that is needed.
But if it appears that an inflation spiral is insipient, about to happen, get out of stocks. They won't help you. If you own cryptos you might have a chance.
In fact, it is possible that some might find them an asset to flee into, given their contrarian nature. Bitcoin is known as digital gold and Litecoin is digital silver. Ethereum might be seen as digital platinum.
In this sense, cryptos could be seen as the only hope to beat inflation if it spirals out of control.
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