In periods of high inflation combined with global conflict, Australian investors potentially face a stagflation-like environment. Cash erodes quickly, while real assets and certain sectors can provide better protection.
First of all, this is what I'm doing. What's good for you could be completely different.
I'm expecting the impacts of the above problems to converge slowly at first, and then rapidly accelerate. Deep down, there's a part of me that hopes these predictions are wrong. My expectation is that transport, food, vegetables and meat, and all seaborne Australian deliveries will rocket up in price, exponentially.
What I'm not doing: selling any of my previously purchased investments. I've completed comprehensive reviews of all my holdings, and since the underlying fundamentals remain strong, I'll be riding these out.
Beyond this: securing the basics. Building and maintaining an emergency fund, three to six-plus months of essential living expenses in a high interest savings account or short term term deposit. If you look at the rates on the average savings account, they won't fully beat 4%-plus inflation but they preserve capital and liquidity better than other options out there.
I don't have credit cards or personal loans, but if I did, I'd prioritise paying down high interest credit cards and personal loans, which are often 15 to 25%. With RBA hikes, variable mortgage rates are rising, many headed above 6%, and aggressive extra repayments or an offset account can help. I'm avoiding any new high cost borrowing.
Beyond the basics, I've never really been a fan of cash holdings anyway. Even though President Trump campaigned on rhetoric of no more foreign wars, I was paying attention to what was happening globally, and began leaning into assets that have historically held up or benefited in inflationary, uncertain, or wartime environments.
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