How to protect your portfolio from inflation

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Inflation has the same effect on your portfolio that termites do on a wood-frame house: it gnaws away unnoticed until the beams start to give.

U.S. investors used to fight back against the pest of inflation with the classic 60/40 portfolio, owning stocks for growth and bonds for ballast. Then 2022 happened. Stocks and bonds fell together as inflation soared to its highest level since the early 1980s, leaving savers with no safe way out.

Inflation is among the top of investors’ worry lists in the third quarter of 2026, according to a Charles Schwab survey. More than half of active-trader participants said they expected it to have the greatest impact on the direction of the U.S. stock market through the end of 2026. Angst about price increases and economic uncertainty has driven long-dated U.S. Treasury yields to the highest in decades.

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The lessons of 2022 left both investors and advisers rethinking how to prevent the bite. Instead of relying on a traditional mix of assets, wealth managers say their clients are now adding shorter-duration bonds, commodities, infrastructure and other alternative investments to spread the risk in a downturn.

“If you only have stocks and bonds, you have two legs on your stool,” said Emily Green, head of wealth management at Ellevest.

Here’s how to build a more durable defense against inflation right now.

The meat of your stock portfolio — 80 per cent to 90 per cent — should still be in broad-market funds, such as those tracking the S&P 500 Index , said Omar Qureshi, managing director at financial planning firm Hightower Signature Wealth. The remaining share can be in more targeted investments.

Set-it-and-forget-it investors have had great gains over the last 10 years despite inflation’s surge in 2022. S&P 500 companies’ earnings are projected to grow 23 per cent in the third quarter of 2026 compared with the same period in 2025, data compiled by Bloomberg Intelligence show. If that projection holds, it represents an unusually strong pace of profit growth and far outpaces inflation over the same period.