There is a prevailing idea that to combat a very inflationary scenario, you will need a precious metal such as gold or commodities.
In today’s discovery, I found a post that relates to how stocks did during the Weimar Republic in Germany, when the country experience a large amount of hyperinflation.
The chart plots the stock market during the period in German Marks and USD.
Note that the Y axis is logarithmic. The USD is RHS instead of LHS in the Legend.
The data is not perfect but had you been in business, you certainly would be doing better than bonds isn’t it?
The fact is that underlying to the price ticker on a stock exchange is still businesses with assets. If the assets are selling below a perceived value of what the asset can produce in goods and services, it is still a good buy. As a whole, these assets are worth “something” and they drive productivity. They have to be worth something.
If the value of money becomes more worthless by the day, you are not going to say I bought this machine yesterday for $1000, now I am going to sell away cheaply. I will use it to produce something that I can sell now that the things that I produce are inflated!
Would Gold and Commodities be as good of a hedge? Perhaps I can refer you to my compilation of some Mental Blocks, Doomsday Scenarios, Misinterpretations that Kill Your Wealth