Over the past month, the price of commodities including oil, food and metals has skyrocketed. Knock-on effects of high commodity prices are well-known, including inflated manufacturing costs, and slowing economic growth. The unique phenomenon of inflated prices coupled with slowing economic growth is known as stagflation — and economists are sounding the warning bells.
Stagflation poses a problem for macroeconomic policymakers as the usual steps implemented to slow inflation — raising interest rates — may now cause increased unemployment and worsen the already vulnerable global economy. Economists at some of the world’s largest banks, such as JP Morgan Chase & Co and Barclays Plc, have lowered their forecasted global growth figures and increased their predictions for consumer prices. These are textbook signs of stagflation and should be considered when making your next investment decision.
However, savvy investors should look to asset classes that thrive in stagflationary environments — a perfect example is gold, which due to its stable supply and long history as a monetary metal, acts as a safe place to store wealth in an environment of falling fiat currency values. Gold has traditionally returned roughly 22% year-on-year in stagflationary environments that have occurred after 1973. Other asset classes such as equities and bonds have historically performed poorly in the same economic conditions. Alternative asset classes also tend to thrive in stagflationary economic environments.
As the old saying goes, “History does not repeat itself, but it often rhymes” (Mark Twain). Digitalisation of assets has further increased the available investment options for those investors seeking a store of value. However, gold may simply be outdated. The asset class has high storage fees and can not be freely used as collateral — thus limiting the utility investors can derive from it.
New digital players, such as Bitcoin (BTC), provide more accessible ways of storing value and may be an attractive proposition to those investors looking at limiting downside during the current market uncertainty. BTC offers more room for capital appreciation and increased utility, including the ability to easily be used as collateral, when compared to gold.
Although BTC may seem an attractive store of value, the digital asset’s inherent volatility may be too high for risk-averse investors to stomach. An attractive investment proposition in these times is margin lending, which is estimated to grow to be a 50 billion dollar industry by 2050. This yield generation technique generates yield by lending assets to overcollateralised traders looking to utilise leverage.
Introducing the Invictus Margin Lending (IML) fund offered by Invictus Capital. The IML fund deploys USD stablecoins to margin lending platforms. The use of stablecoins means that the IML fund is never expected to lose value, and has historically returned 10-12% p.a. Invictus Capital has a strong reputation in the crypto space and has offered investors stellar returns since its inception in 2017.
Invest in IML today and protect your capital during these turbulent times!
*Please note that the IML fund will be changing name to the Invictus Stablegrowth Fund.
