Inflation has emerged as a top concern for many since the world emerged from pandemic-induced lockdowns. People are realizing that their incomes are not keeping up with the rising prices, and this is true even for those in technology sectors that have received large wage increases.
Many businesses have faced challenges in sustaining profits due to the rising costs of raw materials. Commodity prices soared in the post-COVID phase and only began to decline in 2023, resulting in three years of intense margin pressure.
This also affected the world of investing. The unprecedented increase in retail investor participation in the stock market was at least partly due to the economic stress we all felt in 2020.
Ordinary people tried their luck in the Indian stock market, many for the first time, hoping to make some extra money. And sure enough, they did, at least until the end of 2021. Of course, a lot of water has passed under the bridge since then.
Now, as 2024 arrives, the imperative to outpace inflation continues. Although inflation rates have decreased compared to the past two years, prices continue to rise, a crucial factor for investors to consider in their 2024 investment strategies.
Let’s explore five assets that could potentially buck inflation in 2024:
#1 & #2 Gold and Silver
Gold and silver are classic inflation hedges. Their prices have risen recently, and many market experts have a bullish outlook for these metals in 2024. As international and monetary assets, their values are closely linked to the strength of the US dollar. The direction of the US dollar largely depends on international fund flows, which are influenced by interest rates.
With the US Federal Reserve signaling possible rate hikes in 2024, investors could shift their funds from safe US government bonds to riskier assets. Some of these funds are expected to flow into gold and silver, as falling interest rates are likely to weaken the US dollar, which bodes well for these metals.
For guidance on investing in gold and silver, check out Equitymaster’s resources.
#3 High Dividend Paying Stocks
In periods of high inflation, investors often turn to stocks of large, well-established companies known for their large cash flows and generous dividend payments. These companies can usually pass on increased raw material costs to consumers without losing market share. Their stability makes them attractive during inflationary times. Equitymaster offers a screener to identify stocks of high dividend paying stocks and high dividend yielding stocks in India.
#4 Real estate
Real estate is a long-term asset, but it is expected to retain its value in 2024. With interest rates stagnant and a potential downsizing cycle on the horizon, EMI is likely to stabilize or decrease. Combined with gradually rising incomes, real estate could become more affordable, potentially leading to an increase in both property values and rents. However, real estate should always be considered a long-term investment and requires thorough due diligence.
#5 Cryptocurrencies
Although not a recommendation, it is worth noting that cryptocurrencies could continue their recovery that began last year. Despite a difficult 2022, major cryptocurrencies such as Bitcoin, Ethereum, and even Dogecoin have endured. Cryptocurrencies face many issues and regulatory hurdles, and we at Equitymaster refrain from endorsing any. However, if the current crypto bull market continues, they could potentially outpace inflation in 2024. But, as always with cryptos, caution and skepticism are advised.
Happy investing!
Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com