Are treasury notes a good thing to invest with in times of inflation?

Question

I predict the dollar will slowly gain strength this year but inflation will press higher too. I also think the stock market is not done yet with some downside pressure though short term there is a little blip to the upside. So are treasuries a good place to hold cash until the stock market settles out and begins another bull market? Or would corporate bonds be better?

Answer 1

Bonds are not a good investment to be holding in times of inflation. Bonds have a fixed interest rate that will not change in response to an inflation rate change. This means the bond's interest rate is becoming more and more worthless as the inflation rate grows. However bonds are much better than cash which fares even worse in times of inflation. I have heard stocks are inflation cushioned because in times of moderate inflation the entire market seems to lock step with the inflation rate.

Answer 2

As a rule inflation is not good for bond, or stocks in the short term.  But in times of uncertainty investors often move to treasuries in a Flight to Quality of a Flight to Safety.  This is evident in low yields  Treasuries have done pretty well recently.