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Trading Opportunities in Times of Inflation: What to Trade When Your Go-to Assets Fail

Dubai, UAE – 4 October 2022: Whether regionally or globally, nothing seems to be slowing inflation down, while fears of post-inflation recession are mounting. As measured by the Consumer Price Index (CPI), inflation rose to a record high of 9.1% YoY in Europe, hit double digits in the UK, and is currently sitting at 8.3% YoY in the US.

The prices of products and services are spiking, consumers’ purchase power is free-falling, and investors are scrambling to find the best potential opportunities in these volatile markets.

Ritu Singh, Regional Director of Stone X Group Inc. confirms that such potential opportunities may exist, but investors need to know where to look. “These are certainly challenging times for traders and investors, especially that two of their favorite go-to assets – and I am talking about Gold and Oil here – aren’t the safe-havens for investors that they usually are”, says Singh.

Gold – a popular commodity in the MENA region – is known to outperform during times of high inflation; however, today, it’s trading at a 2 ½ year low. With a continuing downward trajectory, the precious metal doesn’t seem to be a safe choice anymore for investors. Neither does Oil, which has fallen by 30% since its June highs, despite oil producing nations taking rapid steps to stabilize its price.

“You need to look for safer and more consistently reliable assets, and in today’s market, the main asset that’s showing this kind of stability and strength is the US Dollar. In fact, the currency’s strength – despite the raging inflation – is also largely contributing to weakening Gold’s position”, adds Singh.

Global trading and investment hubs, including Dubai, consider the USD the global currency for trading. It is currently hovering around the 1:1 exchange rate to the EUR, and parity with the GBP is not far off. Moreover, the USD could continue to perform well against the Japanese yen, as central bank divergence remains strong and potentially against other currencies where central banks are looking to slow their pace of tightening, such as the AUD and CAD. Not only is the USD benefitting from the hawkish Federal Reserve, it is also gaining ground on safe-haven inflows. As such, investors are likely to keep buying the dollar because of the lack of other, equally strong alternatives, until upcoming monetary policies are announced in the US or the US inflation starts showing greater signs.

“Investors often don’t have the experience or extensive knowledge to find the right investments in time of crisis – in this case inflation – and that’s where FOREX.com’s independent experts come in handy”, states Singh.

Part of the StoneX Group Inc., Forex.com is a global market leader that provides independent traders the technology and tools they need to connect to global markets. Since 2001, Forex.com has established award-winning platforms, services, and technologies that have been utilized by over 500,000 traders around the world.

Singh concludes: “For investors who are already anticipating recession, we believe that in addition to the USD, which has good probabilities of retaining its strength in the upcoming future, we believe there are valuable potential opportunities in trading defensive stocks with strong balance sheets such as utilities, energy, and consumer staples. Our advice would be to look for those firms that are able to pass on higher costs to the consumer.”

Good examples of similar stocks can be found on Dubai’s Financial Market, including Dubai Electricity & Water Authority, Dubai Refreshments Company P.S.C., United Foods Company PSC and Apparel Group UAE.

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