During periods of rising inflation, many traditional investments like stocks and bonds tend to fall short. While equities may offer some protection, their performance is often inconsistent—and bonds typically perform the worst. According to Registered Financial Planner Josefino Gomez, it’s time investors looked beyond the usual portfolio mix.
“In inflationary periods, equities and bonds are negatively affected, especially when the inflation is local,” Gomez told Financial Adviser PH. “Smaller companies also struggle because they can’t benefit from economies of scale the way large corporations do.”
A recent study cited by Gomez, “The Best Strategies for Inflationary Times” by Neville, Draaisma, Funnell, Harvey, and Van Hemert, analyzed asset performance across nearly a century. The findings? Commodities consistently delivered positive real returns during inflation surges—particularly energy, industrial metals, and precious metals. Even soft commodities like food performed well, though to a lesser degree.
“Commodities can serve as a cushion when inflation eats into the value of money,” Gomez explained. “But not all commodities perform equally. Energy leads by a wide margin, while food commodities are more modest.”
He also pointed to trend-following strategies as a smart approach. “These strategies—focused on bonds, equities, currencies, and commodities—have historically shown strong hit rates during inflationary episodes,” Gomez said. “They adjust based on market momentum, offering flexibility when the economic outlook is uncertain.”
For investors looking to diversify even further, collectibles such as art, stamps, and fine wine are also worth considering. “Real annual returns for these assets were positive during inflationary times. Art and stamps even performed better under inflationary pressure,” he added.
Gomez emphasized that no single asset can fully protect against inflation, but strategic diversification can reduce vulnerability. “The key is to move beyond the traditional mindset and look for assets that respond differently to inflation,” he said.
In a world where inflation erodes purchasing power, broadening your investment mix may be your best defense.
