How to invest as inflation, rising interest rates and war disrupt markets

Is art, wine or bitcoin BTCUSD,
+0.15%
a good alternative bet in these uncertain times, especially as equity and bond investors are reeling from a deadly start to 2022?

With few corners of the financial markets spared from the volatility associated with rising interest rates, soaring costs of living and Russia’s war in Ukraine, investors have been looking for places to hide as the Federal Reserve is gearing up to fight inflation at 40-year highs.

Liz Young, Head of Investment Strategy at SoFi
SOFI,
-3.18%,
a San Francisco-based online personal finance company, said it’s worth investors considering unconventional assets, especially as times have gotten tougher for traditional investments, but they should keep it simple .

“I think I like to drink my wine,” Young said, during a panel discussion Tuesday hosted by MarketWatch. “I don’t like investing in wine.”

Watch the full discussion below on investing in a volatile environment, part of a two-day MarketWatch video series called “Master your money”.

Does it make financial sense to bet on wine, art, crypto, meme stocks and more in a tough market?

For Victor Jones, Head of Global Strategy at tastytradea Chicago-based financial trading network, it’s all about minimizing downside risk as financial conditions tighten.

“There was probably a group of people who came in over the last two or three years, who were introduced to the markets in a world where the cost of capital was cheap,” Jones said. “If you took risks, the cost of risk was low.”

But now “the cost of risk is accelerating upwards,” he said, warning that investors have now started “paying tuition” to learn how to invest in times of high inflation, lower liquidity and increased volatility.

Other highlights:

  • Traditional 60/40 portfolio construction isn’t dead forever, despite this year’s huge bond correction, SoFi’s Young said.

  • Financial innovations, including split art opportunities or crypto investing, can provide investors with ways to hold uncorrelated assets, over a longer horizon, Jones said.

  • Meme actions aren’t a thing of the past, according to Jones, but the definition could change. Twitter Inc. TWTR,
    +3.93%
    may not be a meme, Jones said, but he’s getting attention with Tesla Inc. TSLA,
    -0.37%
    Chief Executive Elon Musk’s roughly $43 billion bid for the social media platform.

  • It’s not over for tech stocks, but be careful.

US stocks fell on Friday, with the Dow Jones Industrial Average DJIA,
-2.82%
registering a decline of nearly 1,000 points and its worst daily percentage decline since October 28, 2020. The S&P 500 SPX Index,
-2.77%
slip 2.8%. Yields in the Treasury market rose during the week, with the benchmark 10-year rate TMUBMUSD10Y,
2.917%
almost 2.9%, approaching the key level of 3%.

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