The US inflation rate rose 8.5% in March, the highest increase since 1981, the Bureau of Labor Statistics reported on Tuesday (April 12).
The increased inflationary rate follows a surge in the cost of energy and food as evidenced in the US consumer price index.
The monthly rise was 1.2 per cent, the fastest jump since September 2005 and a sharp acceleration from the 0.8 per cent increase recorded in February.
No doubt the rising inflationary rate is placing enormous pressure on the US Federal Reserve to take aggressive action to tackle inflation.
With the Russian invasion of Ukraine ongoing and fueling a rise in energy and food costs and new Covid-19 lockdowns in China that could possibly worsen supply chain constraints, investors should prepare for even higher rates of inflation in the coming months.
So, what should you do in a high inflation environment?
Well two things: 1) Try to limit the amount of debt you accumulate (credit cards and loans) as interest rates will likely see an increase to combat inflation and 2) Invest, invest, invest.
By investing in stocks, you become a shareholder in companies that are better able to absorb inflationary shock.
This will allow for resilience in the company’s earnings, and of course, benefit you as the investor.
In addition to stocks, investing in other asset classes such as unit trusts, cryptocurrency, real estate, precious metals and in demand commodities may also be to your benefit as you try to beat inflation.