The Fed was wrong about inflation

When COVID-19 pummeled the economy two years ago, the Fed dropped its benchmark interest rates to zero and launched a massive quantitative easing program.

But according to Rogers, that easy-money approach is now biting us in the form of skyrocketing consumer prices.

“Throughout history, money printing and borrowing and spending huge amounts of money has always led to inflation,” he says. “We’re going to have inflation now. It’s going to get worse.”

Consumer prices in February spiked 7.9% from the year-ago period, the fastest increase since January 1982.

The Fed is now expected to raise interest rates multiple times in 2022 to help tame inflation.

“[Inflation] is going to lead to higher interest rates, and it's going to lead to profit erosion in some industries and some companies, and all of us are going to have to pay more for a loaf of bread or whatever we buy,” Rogers says.

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Big market crash coming

Investor sentiment isn’t exactly bullish at the moment. Year to date, the S&P 500 has tumbled 13%. And the Fed hasn’t even started to raise interest rates.

Rogers thinks the worst is yet to come.

“There'll be a big collapse. … Bear markets always hurt a lot of people, especially the stocks that have been the strongest.”

He has a point. Stocks that were soaring in recent months seem to be getting hit the hardest in the current selloff.

For example, the tech-centric Nasdaq, which was filled with high-flying growth stocks in 2020 and 2021, is down 18% so far in 2022.

Metals to the rescue

In this environment, investors looking to preserve their wealth might want to check out the commodities sector.

Rogers says commodities performed poorly over the past decade as investors moved toward more conventional assets like bonds, stocks and real estate. But he forecasts a prolonged rebound in the space.

“Since supply and demand have gotten out of whack, in most commodities, the commodity bull market will last a long time.”.

One commodity that has received a lot of investor attention lately is gold. Earlier last week, the price of the yellow metal climbed above $2,000 an ounce.

Rogers says he owns gold along with another traditional safe-haven asset, silver.

“I'm an old peasant and us old peasants know, we better have some gold and silver when things go wrong.”

Rogers points out that silver could be an opportunity at the moment “because it’s cheaper.” The grey metal currently trades at $25.82 an ounce, substantially below its historical high of roughly $50 an ounce.

Rogers also says that investors can get good ideas simply by paying attention to fundamental changes happening around the world.

“Electric cars use several times as much copper and lead as regular cars, so the demand for a lot of stuff is going to be going up.”

Investors looking to capture the moves in metals can use ETFs such as the SPDR Gold Trust (GLD) and the United States Copper Index Fund (CPER).

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About the Author

Jing Pan

Jing Pan

Investment Reporter

Jing is an investment reporter for MoneyWise. Prior to joining the team, he was a research analyst and editor at one of the leading financial publishing companies in North America. An avid advocate of investing for passive income, he wrote a monthly dividend stock newsletter for the better half of the past decade. Jing holds a Master’s Degree in Economics and an Honours Bachelor of Science Degree, both from the University of Toronto.

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