Quantum Wealth Summary

 

  • There’s been an oil shock on top of inflation fears. Does this resemble the 1970s crash?
  • If so, learning from history, how can investors protect themselves?
  • Which sectors and companies could offer the best protection?
  • How can you effectively protect wealth in an inflationary environment?

 

 

‘In a crisis, be aware of the danger — but recognise the opportunity.’

—John F. Kennedy

 

When the market is worried, it doesn’t take too much to turn that worry into gut-wrenching, sell-button-hitting fear.

The market is always worried about something. For much of this year, it’s been inflation following Covid money printing. Or worse: that spiralling into stagflation.

When the Ukraine crisis kicked off, there was some drawdown at first. Then a recovery. But next, with Russian supply threatened, the oil price spiked.

And there is the very real fear of a return to the bleaker scenario that shaped my childhood: rocketing oil prices. Abject stagflation.

In fact, we had the family car converted in the late 1970s to CNG. To afford travel around the country. The oil price went from around US$3 to $20 a barrel in a short space of time.

Dad’s CNG Rover and me, lawnmowing ESG-style, circa 1978. Source: Author

 

As for today’s markets, it was this fear of oil-induced stagflation that a more frightening sell-off got underway. The oil price has gone from a low of around $20 in 2020 to over $130 at one point earlier this month.

Again, an increase of over 6x in a short space of time.

When you get stagflation — fast-declining growth against rapidly rising prices — the economy is sick. Asset prices, especially property — but also many stocks and shares — start to haemorrhage. Particularly as the lethal but necessary medicine of hiking interest rates kicks in.

  • If you look back at the 1970s, house prices fell in real terms by about 40%. They didn’t recover until the mid-1990s.
  • Sharemarkets did follow the housing crash. But they began to recover very quickly by the early 1980s. Going on to increase up to 1,500% by 2021.
  • Through the ‘70s crash, there were also certain companies and sectors which held their value much better. And continued to pay income, sheltering shareholders — to some degree — against inflation.

Are we facing this super-cycle again?

Well, what is happening now looks like the past, some four decades ago.

So, today, I want to examine where financial markets could provide potential refuge. I am profiling and analysing companies that could give protection over the next few years.

Let’s take a look…