High inflation was hogging the headlines on Tuesday, with U.S. CPI numbers coming in at 6.2%, the highest level it’s been in around 30 years. Undoubtedly, investors have the right to be concerned by the numbers. With no signs of fading anytime soon, those who were unprepared for a world with elevated levels of inflation may wish to take steps now, as the U.S. Fed continues to focus their efforts on employment over getting that inflation genie back in the bottle.
How to invest through an inflationary environment
There are a handful of ways to bring the fight to elevated levels of inflation. Most think of cryptocurrencies like Bitcoin or Ether. Other, more traditional investors would be more inclined to put money in some precious metals, most notably gold and silver. Real estate and other alternative assets may also be atop the list.
While such assets are far better stores of wealth than cash (I’m actually not too sure about Bitcoin, given its volatility), I do believe that the best inflation-resilient investments are common stocks, specifically those of businesses with immense pricing power. Indeed, such firms can easily raise prices accordingly without hurting sales growth by a considerable amount. And it’s these firms that may not only allow Canadian investors to dampen the blow of inflation in the 4-6.5% range, but also potentially profit from it.
Fighting inflation with common stocks on the TSX
Of course, diversification remains key, and one must never forget about value. After Tuesday’s brutal reaction, I think investors should give a second look at the many neglected TSX stocks that can better enable one to offset continued inflation. Whether it dies down next year is anybody’s guess. I think it will, but there’s a chance that I’m wrong.
As such, investors should acknowledge the uncertainties and the risk of a prolonged period of elevated inflation. While the market’s reaction to the U.S. consumer price numbers was overwhelmingly negative, some names didn’t deserve to bet hit given their inflation resilience.
Without further ado, consider Agnico Eagle Mines (TSX: AEM)(NYSE: AEM), one top gold miner that could help your portfolio dodge and weave through inflationary pressures that could weigh down this market over the next 18 months.
Agnico Eagle Mines: A Golden opportunity for Canadian investors?
Agnico Eagle Mines is a remarkable gold miner that’s fallen from grace amid gold’s recent pullback. The well-run miner is poised to merge with Kirkland Lake Gold, a deal that could pay off big-time once gold prices have a chance to bottom out and head higher. Indeed, gold prices have been quite sluggish, likely thanks in part to the continued rise of cryptocurrencies.
Still, it looks like gold is ready to shrug off the weak start to 2021, perhaps closing out the year with a bang. Today, gold is just above the US$1,800 mark, with many investors growing jittery about Tuesday’s worrisome CPI numbers.
Gold is a time-tested store of value, and in inflationary environments, you’ll want some in your portfolio to improve upon your diversification. With Agnico stock still down over 32% from its high, I’d look to the miner as a magnificent way to potentially profit from the threat of runaway inflation. Further, if the more volatile crypto goes into a cyclical downturn at some point down the road, inflows could return to gold and its miners.
At today’s levels, Agnico is a best-in-breed play to bring the fight against inflation.
