Like Odysseus trapped between the sea monster Scylla and the whirlpool Charybdis, investors must simultaneously face inflation and the Russia-Ukraine war. Below, I’ll show you a shrewd way to navigate these double dangers, and still make money.

Inflation and overseas crisis are emerging at a downbeat time for corporate earnings. After several quarters of stellar double-digit growth, projected quarterly earnings are slowing down.

For the first quarter of 2022, the projected earnings per share (EPS) growth rate for the S&P 500 is 4.8%.

If 4.8% turns out to be the actual growth rate for Q1, it will represent the lowest EPS growth rate for the index since Q4 2020, at 3.8%.

The inflation beast…

The Bureau of Labor Statistics (BLS) reported last week that in February, the Consumer Price Index (CPI) jumped 7.9% over the last 12 months, the highest yearly increase since 1982.

Corporate managers continue to express concerns about inflation. Research firm FactSet (the data provider for Investing Daily) searched for the term “inflation” in the conference call transcripts of all the S&P 500 companies that conducted Q4 earnings conference calls from December 15 through March 11.

Among these companies, 356 cited the term “inflation” during their earnings calls for Q4, which is well above the five-year average of 144 (see chart).

The industrials (61) and financials (52) sectors were home to the highest number of companies that cited inflation on earnings calls for Q4.

Data show that inflation is cutting into profit margins. During the first three quarters of 2021, many companies had successfully absorbed higher input costs without significant damage to margins, but inflation is running so hot, that’s increasingly less possible.

As inflation gets cited with greater frequency on Q4 calls, profit margins for Q1 are accordingly getting revised downwards. The projected net profit margin for the S&P 500 for Q1 is 12.2%, which is below the estimate of 12.4% recorded on December 31, 2021.

Eight sectors have witnessed a decrease in their Q1 net profit margin estimates since December 31, led by industrials (to 7.9% from 8.8%).

Meanwhile, on Q4 earnings calls from December 15 through March 11, 45 S&P 500 companies cited the term “Ukraine,” which is well above the five-year average of four (see chart).

Among those 45 companies, 25 cited Ukraine since the escalation of the military conflict on February 23.

Worries about the Russia-Ukraine war and apprehension about the first rate hike by the Federal Reserve weighed on stocks Monday. The major U.S. stock market indices performed as follows: the Dow Jones Industrial Average closed essentially flat; the S&P 500 -0.74%; the NASDAQ -2.04%; and the Russell 2000 -1.92%. The 10-year U.S. Treasury yield currently hovers at 2.14%, the highest level since 2019.

In pre-market futures contracts Tuesday, U.S. stocks were trading mixed. Chinese and European stocks were extending their slide from Monday, amid continuing Russia-Ukraine worries. Investors also are bracing for a Fed rate hike this week.

Read This Story: Deciphering the Manic-Depressive Market

Inflation isn’t just a concern in the U.S. The higher cost of energy is a global phenomenon. What’s more, several central banks across the world have implemented some sort of stimulus program since the coronavirus outbreak in 2020. Extraordinary stimulus was necessary to prevent a prolonged recession (perhaps even depression), but now the bill is coming due in the form of higher inflation.

Here in the U.S., Treasury inflation-protected securities (TIPS) have been a popular inflation hedge against the growing specter of inflation, but there’s an even better hedge against inflation: commodities.

Increasing your exposure to raw materials is a powerful way to insulate your portfolio against both inflation and geopolitical turmoil, and to reap growth as well. One of the world’s most vital commodities is copper.

Copper is in great demand but short supply, which spells huge future gains for producers of the “red metal.” For details about copper and how to profit from its rise, click here.

John Persinos is the editorial director of Investing Daily.

Follow John on Twitter: