7 Strategic Ways to Inflation-Proof Your Portfolio in an Uncertain Economy

The recent tariff announcements by the U.S. government have reignited concerns about persistent inflation—fears that were already simmering beneath the surface. According to Collin Crownover, lead inflation analyst on Fidelity’s Asset Allocation Research Team, these tariffs pose a direct stagflationary risk—where inflation rises even as economic growth slows. Crownover estimates that if the tariffs announced in April are upheld, they could increase the U.S. inflation rate by as much as 2 percentage points.

That’s not just an academic number—it’s a wake-up call. With consumer inflation expectations spiking to multidecade highs, investors can’t afford to ignore inflation risks. These expectations often drive real inflation outcomes, as businesses feel emboldened to pass on rising costs.

The silver lining? While inflation can erode the value of your savings and investments, there are several smart, time-tested strategies to help protect your portfolio. Let’s explore seven inflation-resistant investments that can strengthen your financial defenses during uncertain times.

1. Equities: Your First Line of Defense

Stocks remain one of the most potent long-term tools against inflation. As companies increase prices to cover rising costs, their revenues—and potentially their profits—can grow in real terms. This pricing power helps equities keep pace with, or even outpace, inflation over time.

Anu Gaggar, VP of Capital Markets Strategy at Fidelity, points out that companies often adjust prices during inflationary periods, preserving margins and delivering real earnings growth. Of course, stock markets are not immune to short-term volatility. Inflation spikes can create turbulence, especially when accompanied by economic slowdowns. However, over multi-year horizons, equities have typically provided returns well above inflation.

Tip: Focus on sectors with pricing power—like consumer staples, healthcare, and technology—to add inflation resilience within your equity holdings.

2. International Stocks: Currency Diversification with Potential Upside

U.S.-based investors often underweight international equities, but global diversification becomes particularly valuable in inflationary environments. A weakening U.S. dollar—often a byproduct of high domestic inflation—can boost the value of international returns when converted back to USD.

Gaggar highlights that the currency translation effect could be a tailwind for U.S. investors in non-U.S. stocks. After years of underperformance versus U.S. equities, international markets may be poised for a rebound, especially if the dollar declines further.

Tip: Consider developed markets (e.g., Europe, Japan) and emerging markets (e.g., India, Brazil) for currency diversification and exposure to different economic cycles.

3. Treasury Inflation-Protected Securities (TIPS): Fixed Income with a Twist

TIPS are U.S. government-issued bonds specifically designed to adjust with inflation. Both the interest payments and the principal rise in line with the Consumer Price Index (CPI). This feature makes TIPS a powerful tool to preserve real purchasing power in your bond allocation.

However, TIPS generally offer lower yields compared to other fixed-income instruments, and their value can fluctuate with interest rates. They also may experience illiquidity during extreme market stress.

Tip: Use TIPS as a core holding in the fixed income portion of your portfolio—but don’t overconcentrate. Blend with other bonds to balance risk and return.

4. Gold: A Classic Hedge with Modern Appeal

Gold doesn’t pay dividends or generate earnings, but it’s one of the few assets with a proven history of performing well in stagflationary environments. In 2024, gold has seen renewed investor interest as inflation fears mount.

Gaggar notes that gold bullion has historically outperformed when inflation exceeds 3%. While gold can be volatile, it can act as a store of value and a hedge against fiat currency debasement.

Tip: Limit gold exposure to 5%–10% of your portfolio. Consider physical bullion, gold ETFs, or shares of gold-mining companies depending on your risk tolerance and liquidity needs.

5. Real Estate and REITs: Tangible Inflation Buffers

Real estate often benefits from inflation because property values and rents tend to rise over time, boosting income for property owners. If you already own a home, you have a built-in inflation hedge. For broader exposure, consider Real Estate Investment Trusts (REITs)—publicly traded companies that own income-generating properties.

REITs offer the liquidity of stocks with the potential for inflation-adjusted income. However, they are not without risks—rising interest rates can weigh on REIT valuations, and real estate markets are cyclical.

Tip: Diversify across REIT sectors (residential, commercial, industrial) and use REIT-focused ETFs or mutual funds to spread risk geographically.

6. Floating-Rate Loans: Built-in Protection Against Rising Rates

Floating-rate loans, or bank loans, offer interest payments that adjust with short-term interest rates, making them attractive during inflationary periods when rates rise. These loans have historically shown a strong ability to keep pace with inflation.

The catch? These loans are typically issued by below-investment-grade borrowers, increasing credit risk. If inflation persists but economic growth stalls, defaults could spike.

Tip: Floating-rate loan ETFs or mutual funds can offer broad exposure, but understand the credit quality and liquidity profile before investing.

7. Commodities: Broader Exposure Beyond Gold

Beyond gold, commodities like oil, natural gas, copper, and agricultural products can offer inflation-hedging benefits. These goods are often the root of price increases and tend to rise in value during inflationary surges.

However, commodities can be highly volatile and are influenced by geopolitics, regulation, and global supply chains. Their performance against inflation is inconsistent but can be strong during unexpected inflationary shocks.

Tip: Gain exposure through diversified commodity ETFs or mutual funds. Alternatively, consider investing in commodity-producing companies for indirect participation.

Conclusion: The Power of Diversified Inflation Protection

There is no single asset class that perfectly hedges against inflation. But by combining multiple strategies—stocks, TIPS, gold, REITs, commodities, and floating-rate debt—investors can build a resilient portfolio that’s better prepared for a variety of economic scenarios.

With inflation risks back in the spotlight due to tariffs, consumer expectations, and global uncertainty, it’s crucial to act proactively rather than reactively. A well-diversified approach not only helps mitigate inflation-related losses, but also opens up new avenues for long-term growth.

Action Step: Review your current portfolio with a financial advisor to evaluate your inflation exposure and rebalance accordingly. Consider each of these inflation-sensitive asset classes and tailor your strategy based on your risk tolerance, investment horizon, and financial goals.
In today’s evolving economic climate, inflation-proofing is not just smart investing—it’s essential.