“The deceleration in the consumer price index for July is likely a big relief for the Federal Reserve,” says Nancy Davis, portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge ETF (IVOL (opens in new tab)). “If we continue to see declining inflation prints, the Federal Reserve may start to slow the pace of monetary tightening.” Still, with consumer prices running hot, investors should continue to protect their portfolios against inflation.
This includes gaining exposure to companies with pricing power (opens in new tab) or dividend-paying stocks (opens in new tab), which can help cushion the impact of inflation. Additionally, there are several sectors that are considered more “inflation-proof” than others, including consumer staples (opens in new tab), utilities (opens in new tab) and real estate (opens in new tab). “It’s always important for investors to be diversified,” Davis says. And adding these types of assets to your investing lineup can offer diversification and create a solid portfolio that can withstand elevated levels of inflation.
With over a decade of experience writing about the stock market, Karee Venema is an investing editor and options expert at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.