Inflation Is Surging: Protect Yourself

Inflation seems to be rising. Protect yourself with Bitcoin, defensive stocks, or a gold miner like Barrick Gold (TSX:ABX)(NYSE:GOLD).

| More on:

Canadians are getting concerned about inflation. Food prices, fuel charges, and housing costs are all expected to be much higher by the end of 2021. This is because of the economic reopening and pent-up demand for all goods. 

The inflation rate was 1.1% in February and is likely to rise much higher in the months ahead. Economists are warning that rising inflation could crash the stock market. In other words, higher inflation could reduce your wealth. Here are some ways you can protect yourself. 

Defensive stock

A defensive stock is usually a boring but essential company that is insulated from inflation. Such companies can raise their prices to match inflation so that the net effect is nullified. The best example is Canadian Pacific Railway (TSX:CP)(NYSE:CP). The stock has been rising over the past few months, even as inflation expectations surged. 

Canadian Pacific ships grains, raw materials, and bulk goods across North America. As inflation rises, the value of these commodities rises too. That means inflation actually benefits Canadian Pacific, as higher volumes lead to higher charges. 

This defensive stock trades at 26.6 times earnings per share and could offer substantial dividend growth in the months ahead.  

Gold

Gold, of course, is still considered the ultimate price spike hedge. The value of this shiny yellow metal went through the roof in the 1970s, when prices were rising faster. It’s likely to do so again this time. 

Fortunately, one of the world’s best gold miners is listed in Canada. Barrick Gold (TSX:ABX)(NYSE:GOLD) stock has been steadily rising since the crisis erupted last year. At one point, it was even part of Warren Buffett’s portfolio. Buffett may have ditched the stock, but that doesn’t mean it won’t live up to its reputation as a solid hedge against reflation.  

Bitcoin

A somewhat controversial idea has emerged during this inflation cycle. Some experts claim that Bitcoin is detached from the rest of the economy, which could make it an ideal inflation hedge. 

It’s too early to say if this is true. Bitcoin, after all, has only been around 12 years. However, the price of each unit has been rising since the start of 2021. That’s despite rising inflation concerns and a falling tech market. In short, Bitcoin could prove itself as an inflation hedge in this cycle. Take a closer look at the Purpose Bitcoin ETF

Bottom line

Investors across the world are concerned about rising prices. As the economy reopens and governments flood the market with stimulus, the price of goods could skyrocket. Higher inflation is usually bad for the stock market. 

If you share this concern, consider taking a closer look at hedges or ways to protect your assets. Assets that rise alongside inflation. Canadian Pacific Railway, gold mining stocks, and Bitcoin could be worth a closer look. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.

More on Investing

GettyImages-1352607170 (1)
Tech Stocks

Why Shopify Stock Is Skyrocketing Today

Shopify published its Q3 report this morning, and it gave investors plenty to be excited about.

Read more »

Hand Protecting Senior Couple
Dividend Stocks

3 Blue-Chip Stocks So Safe Canadians Can Hold Them Until They Die

Canadian National Railway (TSX:CNR) is a stock worth owning for life.

Read more »

stock research, analyze data
Dividend Stocks

14.7% Dividend Yield? Buy Up This Passive-Income Stock in Bulk!

That dividend yield is high, but it still comes with some strong reasons to consider the stock outside of a…

Read more »

calculate and analyze stock
Stock Market

Chewy vs. Pet Valu: Which Growth Stock Is a Better Buy?

Chewy and Pet Valu are two beaten-down pet stocks that trade at a reasonable valuation in November 2024.

Read more »

Forklift in a warehouse
Investing

Canadian Industrial Stocks to Buy Now

Canadian industrial stocks offer a comprehensive variety of safety, dividend, and growth combinations. This ensures that all kinds of investors…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, November 12

Sliding metals prices amid a strengthening U.S. dollar could continue to weigh on TSX mining stocks today.

Read more »

rising arrow with flames
Investing

2 TSX Stocks With Market-Beating Potential

Fairfax Financial Holdings (TSX:FFH) stock has been soaring of late but remains cheap from a valuation perspective.

Read more »

Canadian Dollars bills
Dividend Stocks

1 Dividend Stock That Could Create $5,000 in Tax-Free Passive Income in 10 Years

Here's why Fortis (TSX:FTS) certainly looks like a top dividend stock with outsized total return upside worth buying right now.

Read more »