Investors are emotionally reconnecting with the concept of portfolio diversification as they try to stomp out the high levels of inflation triggered by the pandemic macroeconomic recovery.
Roughly 50% of investors polled in a new survey from UBS found they will be adjusting their portfolios because of fears over accelerating inflation in the next 12 months. UBS's quarterly Investor Sentiment survey found that 35% of investors plan to add stocks, 33% intend to buy precious metals and 32% are keen on sustainable investments moving forward.
On the other hand, 32% of investors are looking to add real estate to their portfolios in a bid to lessen the impact of inflation.
“Though we expect the recent rise in inflation to ease, the outlook for inflation remains uncertain and therefore building inflation protection into portfolios is an appropriate step for investors to be taking now. This includes investing in commodities, private market infrastructure, and stocks with pricing power, as these areas tend to perform better in an inflationary environment and will help to preserve purchasing power over the long term," said UBS Americas and co-president of UBS Wealth Management Tom Naratil.
One doesn't have to look too hard to spot the inflation that is weighing on the minds of investors.
Consumer prices surged 5.4% in June from a year earlier, the largest monthly increase since August 2008, according to the latest Consumer Price Index (CPI) report. Gains were seen in everything from food to women's clothing to used cars. Core prices spiked 4.5%, the biggest increase going all the way back to September 1991.
Elsewhere, the nationwide average price of gasoline has risen by more than $1 since the start of the year. Restaurant hourly wages continue to climb to $15 and above as companies race to secure workers to service an influx of demand.
Even avocado prices are inflationary, Chipotle CFO Jack Hartung told Yahoo Finance Live.
To be sure, investors have felt the inflationary effects firsthand — hence the looming portfolio adjustments.
About 58% of investors surveyed by UBS said inflation has personally impacted them in the past six months. A total of 61% believed inflation would "somewhat" impact their portfolios if they didn't take action.