With the looming specter of a trade war coupled with almost-certain higher inflation and interest rates, the question is how do we prepare ourselves for the storm? Historically in an inflationary environment, bonds get wrecked, stocks underperform, precious metals (mostly) retain their value, and only real estate holds its value and has a positive inflation-adjusted return.
That said, market cycles rhyme but never exactly repeat. I expect this cycle to be similar but with a couple notable exceptions:
Gold still retains its value but bitcoin and other crypto-assets replace silver. Lesser metals such as silver will continue underperforming gold and fail to mean revert. Silver will be supplanted by bitcoin/crypto-assets which can have more favorable economics and a defined, limited supply.
Residential real estate will outperform more than expected. The U.S. compared to other countries has historically had extremely affordable housing relative to income. The gap in new single-family home construction following the 2007 real estate bust has not been filled, resulting in record-low housing inventory. Although interest rates are going up and the SALT-deductions will temporarily limit housing price gains, prices will eventually rip higher when people realize that housing prices will not go down from here and that interest rates have nowhere to go but up.
As with everything, timing is everything. I will not be selling any stocks for now as the exact timing is uncertain and missing out on the final phase of a bull market can mean missing out on 1/3 of the entire run’s returns.
We’ll see what happens.