7 investments to hold as markets grapple with the latest inflation scare
Hotter inflation is likely coming for the US. Luckily, there are a few places where investors can hide, SocGen says.
Strategists at the European bank constructed a 7-part trade for investors looking to hedge against inflation, particularly as fears flare over hotter price growth in the US.
The pace of inflation has generally cooled over the last several years, but that trend appears to have been bucked in 2026 as markets weigh the inflationary impact of the war in Iran as well as President Donald Trump's tariffs.
Those fears have been exacerbated recently by the regime switch-up at the Fed, which is losing the market's confidence that it can bring inflation back down to 2%. Anxiety over inflation swelled this week when Fed Chair Kevin Warsh announced the central bank's decision to keep rates steady despite the recent surge in oil prices and stuck to his view that the central bank should withhold future guidance on where rates should stand.
Expectations for core Personal Consumption Expenditures, the Fed's preferred measure of inflation, remain "above the path typically associated with a smooth return to trend," SocGen wrote in a client note on Friday, referring to how prices have remained above the Fed's 2% target for over five years.
"The macro fundamentals continue to support inflation persistence," they wrote. "A second wave of US tariffs, the accelerating AI and infrastructure capex cycle, renewed oil-price volatility and persistently large fiscal deficits across developed economies all point to a more inflationary backdrop than markets currently discount."
The bank laid out seven assets it believed could perform well amid the inflationary backdrop. Here are the seven hedges it's recommending to investors:
Inflation-protected US Treasurys (TIPS)
Treasury inflation-protected securities, or TIPS, are government bonds that are adjusted twice a year to account for the current pace of inflation. They're generally considered safe havens that can offer a steady return for investors in inflationary environments, with payouts growing as inflation rises.
"TIPS remains our preferred direct inflation hedge," SocGen strategists wrote. "With realised inflation still above market pricing and SG Economics expecting core PCE to remain above 3% in 2026, the case for rebuilding inflation protection remains compelling."
The iShares TIPS Bond ETF, one fund that offers exposure to TIPS, is down 2% for the year. Bond prices trade inversely to yields, so the ETF price falling indicates that real yields are rising.
Inflation-linked European bonds
European linkers — another term for inflation-linked government bonds in Europe — are the equivalent of TIPS in the US. They present a "compelling" opportunity for investors to gain inflation protection in their portfolios, SocGen said.
"Valuations remain compelling in France and Spain, and also in Italy for long-dated linkers. Strong investor demand provides an additional tailwind," the bank wrote.
Copper
The bank called copper the "real-economy inflation hedge."
"Electrification, AI infrastructure, and power-grid expansion continue to drive demand, while mining investment remains subdued. The combination of strong structural demand and constrained supply supports a constructive long-term outlook for copper," strategists wrote.
Copper has been in the limelight lately as investors focus on the physical constraints of the AI boom. The metal is up 14% from levels at the start of the year, adding onto its stellar rally in 2025.
Gold
Gold, a safe-haven that's often thought of as a hedge against inflation, was also on SocGen's list.
The bank called the precious metal a "strategic hedge against policy uncertainty," referring to how geopolitical and rate uncertainty can also stoke higher prices.
"Much of the shift towards a higher-for-longer Fed has already been priced in. ETF demand remains positive, gold volatility has declined, and continued reserve diversification by central banks should provide a durable anchor for prices," SocGen said.
The metal is down 5% year-to-date, cooling after its euphoria rally in late 2025.
Commodity and physical economy stocks
SocGen also said it saw opportunities in stocks linked to the physical economy, such as commodities, industrials, and materials.
The Bloomberg Commodity Total Return Index, which the bank said it preferred for "diversified commodity exposure, is up 18% year-to-date, outpacing the S&P 500.
Strategists added that they also favored the S&P 500 Equal Weight Index "as a cleaner expression of our positive view on the physical economy." The equal-weight index holds a higher concentration of physical economy stocks than the market-weight index, which is largely concentrated in tech.
European bonds and bank & utility stocks
The bank also highlighted sovereign bonds as well as bank and utility stocks in Europe as potential gainers, particularly as the fiscal situation improves across the EU.
"Peripheral countries are now running primary surpluses, while much of the core remains in deficit, driving continued rating upgrades for the periphery," strategists wrote, later pointing to "improving fiscal fundamentals" and stronger expected economic growth in the region.
Private credit
Private credit jitters have dominated headlines lately, but the asset class acts as a "natural inflation hedge through its floating-rate structure," strategists said, pointing to how yields on private credit investments can move higher alongside rates in financial markets.
"With direct lending representing around 70% of the market, higher-for-longer rates translate directly into higher coupon income, making private credit a natural complement to inflation-protection strategies," the bank said.
Private credit funds have struggled lately amid fears of contagion from the software and AI sectors, leading to a wave of withdrawal requests. Blackstone, BlackRock, Apollo, and KKR are some of the giants in the space that have been impacted.
