Inflation is something that most consumers and investors haven’t had to worry about for several decades. Since the early 1990s, governments in countries like the UK and US have managed to control the rate at which currency depreciates and prices increase, keeping it at around 2%.
It’s a far cry from the mid-20th century when we saw inflation reach double digits in some parts of the world. Even the levels of 7-8% of the late 1980s are a long way from those moderate levels seen for most of the 21st century.
But that’s beginning to change. After being sub-1% in 2020, prices rose at a rate of 6.8% in the US in 2021.
For almost everyone, this speed of currency devaluation is a worry since it means that the money we have in our bank accounts is depreciating and our buying power is being diminished. For most people, that means there has never been a more important time to find ways to hedge against the inflationary threat.
In 2022, here are some of the solutions that you might want to consider.
Gold
Gold has been a popular choice for investors for centuries. Its scarcity and practical use in jewelry and manufacturing make it a valuable commodity. Because there is only a finite amount of gold available on earth, it increases in value rather than decreasing like fiat currency does.
Gold has increased in price over the last three years, sitting at around $1,750 per oz, 40% more than it was at the beginning of 2019. If inflation is going to continue at current levels, then the price of gold will likely rise even more.
There are several ways to buy gold but, unlike stocks, you don’t earn any dividend income on any of it. This means gold can often underperform against investing in the stock market since you don’t have the ability to earn compound interest.
iGaming
The iGaming industry is a tale of continents. In Europe, companies have been offering all sorts of online wagering for more than two decades. On the other side of the Atlantic, these brands have only been operating for a handful of years, leaving plenty of room for growth.
Since 2018, US states have been given the freedom to set their own rules about sports betting. It started with just a few, with New Jersey, Nevada, and Pennsylvania leading the way, but many more were quick to follow suit. This expansion is expected to help the industry expand at a compound annual growth rate (CAGR) of 17.34% between now and 2026.
As other states bring in legal online gambling, the competition heats up between iGaming companies that all seek to build a large market share, resulting in large free bets and promotions being offered to new customers. To help consumers take advantage of this competition, sites like OLBG have put together resources to help punters find the best offers for them.
For investors, double-digit growth is an attractive prospect for hedging against inflation, provided they can find companies that look capable of translating some of the market expansion to increased market capitalization.
Chip Manufacturers
If you’ve tried to buy pretty much any type of electrical product in the last year or so, you will have likely noticed that the prices have risen and there are fewer options to choose from. This is because there is a global shortage of microchips brought on by several factors, including increased demand, supply chain disruptions, and a lack of foundries.
This shortage is unlikely to relent anytime soon. As a result, the few companies that do produce these little silicon chips have posted spectacular financial results. For example, the Taiwan Semiconductor Manufacturing Company has seen its share price increase by 265% in the last five years and is currently trading at nearly double what it did in January 2020.
It will invest $44 billion into increasing its capacity this year as it forecasts its sales to grow by 15-20% in the next twelve months, five percentage points higher than previous estimates.
Its rivals are also enjoying similarly rosy outlooks, so could be a good opportunity for hedging against inflation in 2022.
Cryptocurrencies
Cryptocurrencies have been very fashionable among investors in the last two years or so, with some choosing to purchase established tokens like Bitcoin and Ethereum, and others opting for “meme coins” like Dogecoin and Floki.
Some have been drawn in by the hype surrounding the rapidly-rising prices and hopes of finding the next big trend. Others have attempted to take a more conservative approach.
Bitcoin and Ethereum share many traits with gold, which is why some investors like to use them as a hedge against inflation. While cryptocurrencies aren’t overly useful in manufacturing, the Ethereum blockchain does have other purposes. However, the main quality that attracts investors is the finite number of these tokens that can ever be mined, making them scarce in the same way that gold and other precious metals are.
The problem with cryptocurrencies is that they are more volatile and, therefore, come with additional risks that may offset any hedging against inflation.
These are some of the most popular options among investors for retaining the value of capital, though there are many alternatives available to those willing to spend time investigating. If you are concerned about inflation and are unsure about what’s best for you, then you should speak to an independent financial advisor before making any decision.
