UBS is expecting higher inflation in the next decade. Here are 5 trades the bank recommends to beat rising prices.

If you were expecting the Federal Reserve to finally put inflation to rest in 2025, don’t get your hopes up. Rising prices are shaping up to be a persistent problem over the next decade, according to UBS.

The bank is projecting US inflation to hit 3% at the end of 2024, 2.6% at the end of 2025, and 2.5% throughout 2027 — still stubbornly above the Fed’s 2% target. November’s CPI report showed that prices have increased by 2.7% since last year. That’s a slight increase from the 2.6% print in October, indicating that the Fed might have hit a roadblock in the fight against inflation.

UBS sees the megatrends of increased deficits, deglobalization, and decarbonization as drivers of elevated inflation for the next decade.

“With debt levels now much higher, governments have reduced capacity to deal with a future recession or inflationary shock,” UBS Global Wealth Management’s Chief Investment Officer Mark Haefele and his team wrote in the bank’s 2025 outlook.

Additionally, President-elect Donald Trump’s “America First” approach will likely speed up the deglobalization of supply chains. Protectionist policies like tariffs and other trade restrictions are likely to result in higher costs for consumers and businesses, slower worldwide economic growth, and, ultimately, increased inflation.

Lastly, UBS sees increased regulatory pressure worldwide for a green energy transition. Limited natural resources, environmental taxes, insurance costs, and legal restrictions will create an environment with higher energy costs, which can fuel price gains throughout the economy.

If inflation isn’t going away, then the best thing investors can do is to protect their portfolios against it. Here’s what you should be doing with your money to prevent inflation from eating away your returns.

5 inflation-beating trades

It might sound simple, but the first step in building an inflation-resistant portfolio is putting your cash to work in the equity market. While cash is a safe asset class, it can’t compete with stocks when it comes to returns. “Stocks have beaten cash in 86% and 100% of all 10- and 20-year holding periods, respectively, and by more than 200x overall since 1945,” Haefele wrote.

As interest rates continue to drop, investors will only receive lower returns on their cash in the future. High-quality fixed income is another good place to find returns. UBS recommends investment-grade bonds, which will perform well in the case of a hard-landing scenario brought upon by a tariff shock. These bonds have a favorable risk-reward profile, and the bank expects them to return mid-single digits over the next 12 months.

Real assets — tangible resources valued based on their utility — are another key part of an inflation-resistant portfolio, the bank said. Real assets provide diversification, help boost returns, and protect against volatility.

“They have a greater chance of matching or exceeding rates of inflation than cash or fixed income,” Haefele wrote.

Gold is a classic example. Exposure to gold can effectively hedge your portfolio against geopolitical risks, growing national debt, and policy changes, according to UBS.

The yellow metal has surged over 30% in value since the beginning of 2024. The bank expects the price of gold to rise to $2,900 an ounce by the end of 2025, propelled by the trend of growing US national debt, increased demand from central banks around the world, and decreasing interest rates. UBS recommends investors allocate around 5% of their portfolio to gold.

Investors can add gold to their portfolio through funds such as ​​the iShares Gold Trust (IAU) and the SPDR Gold Shares fund (GLD).

Gold isn’t the only metal that UBS is bullish on, though. Industrial metals — such as copper, lithium, and nickel — will see their prices boosted in 2025 due to their critical role in the green energy transition and heightened electricity demand from AI, according to the bank. This high-growth group of commodities can help increase returns on portfolios even with increased inflation.

Among exchange-traded metals, UBS favors copper, which the bank predicts will reach a price of $11,000 per metric ton by the end of 2025. The metal currently trades at $9,109 per metric ton. The best way to add exposure to these metals in your portfolio is to buy the stock of select miners and processors, as getting direct exposure to these assets can be complex, said the bank.

Some of the biggest mining companies in the market include Anglo American PLC (AAUKF) and BHP Group (BHP). The Global X Copper Miners ETF (COPX) is one way to gain more diversified exposure to the industry.

Lastly, the bank is also bullish on real estate, as this area of the economy will receive a boost from lower interest rates. Real estate is an effective way for investors to diversify sources of return within their portfolio.

“We anticipate double-digit performance overall,” Haefele said regarding public market real-estate performance. Constrained real estate supply coupled with rising demand is likely to support prices. The bank sees opportunities in real-estate sectors such as data centers, logistics, and telecommunication towers.

Examples of real estate funds include the iShares US Real Estate ETF (IYR), the SPDR Dow Jones REIT ETF (RWR), and the Schwab US REIT ETF (SCHH).