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Profiting from high commodity prices and inflation

A commodity royalty group has reported record results that prompted analysts to upgrade their forecasts
Profiting from high commodity prices and inflation

The Bank of England’s downbeat economic outlook has sent a wake-up call to investors that the central bank’s monetary tightening cycle could lead to material demand destruction and tip the economy into recession. Having lost credibility by failing to tighten policy in the belief that the inflationary blip would be transitory, rate setters look hell bent on returning core inflation back towards the central bank’s 2 per cent target at all costs.

Given that the UK consumer accounts for more than 60 per cent of GDP, this does not bode well in the absence of a fiscal response by government. I am not holding my breath, nor are currency traders.

The prospect of weaker economic growth has sent sterling to a two-year low against the US dollar, a fall of 13 per cent in the past 12 months. The depreciation will further fuel domestic inflation as it feeds into import prices. With stagflation a real possibility, it pays to focus on investments that offer a hedge against inflation and benefit from sterling weakness, too.

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