Hedge fund manager lays out his two best investments for a post-pandemic inflationary world

The U.S. reached another grim pandemic milestone Friday, with news that post-recession employment gains have largely been wiped out, though some relief on the U.S.-China trade front has investors looking past that historic data…

Our call of the day comes from hedge fund Stanphyl Capital portfolio manager Mark Spiegel, who is pretty gloomy about the economic future that lies ahead, but has straight-up advice for investors wondering how to face down this pandemic. “If you have a long-term perspective, buy an S&P 500 index SPX, 1.57% and own some gold,” he told MarketWatch in an interview.

Spiegel, who is best known for his bearish view on Tesla TSLA, +5.31% (he’s still bearish), sees stocks as a “somewhat reasonable hedge” against the inevitable inflation he sees coming. “The endgame here is that the government prints money and prints money and prints money,” he said.

The manager says too many are thinking the world is going to bounce out of the coronavirus-driven depression that’s already hitting us. He explains that even if a coronavirus vaccine comes in 18 months, the economy will spend another year crawling out of the downturn, then it will take another year for businesses to get confident enough to start spending and hiring. By then, we’ll be facing higher inflation and possibly a repeat of 1970s stagflation, he says.

“The eventual end-game here is inflation, higher interest rates and a lower dollar, but it’s very hard to time that,” Spiegel says. “When that happens, stocks eventually go up in what’s called nominal terms, even if not in inflation-adjusted terms. If a company makes Doritos and a bag of Doritos goes from $2 to $8 because of inflation, that company’s earnings are gonna go higher in nominal terms, even if they trail inflation.

“So in the very long run, stocks will be a somewhat reasonable hedge against inflation,” he said.

The chart

Here’s a lockdown chart that shows how the U.S. has fallen behind Italy, which started its own shutdown weeks before. It comes from Torsten Slok, chief economist with Deutsche Bank Securities:

The buzz

A record 20.5 million jobs were lost in April, and the unemployment rate hit a post World War 2 high of 14.7%. The so-called U6 unemployment rate hit 23%, suggesting one in four Americans are either underemployed or jobless.

Hitting the airwaves just ahead of that data, President Donald Trump commented that…

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