Americans tend to be parochial; it’s been ingrained in our nature ever since George Washington warned the new republic about foreign entanglements.

So when commentators in this country blame inflation on domestic political factors, I shake my head. One of the most deceitful (and dumbest) arguments I hear is that gasoline prices are high in the U.S. because of federal policies that encourage alternative energy and environmental protection.

Another supposed inflation culprit is the American Rescue Plan of 2021, implemented to combat economic damage from the pandemic. The plan included an increase in the federal minimum wage, direct checks for Americans making $75,000 or less a year, an extension of $400 federal unemployment benefits, and more money for small businesses.

Riddle me this: If these factors were the primary causes of inflation, how does one account for inflation that’s been rampant…and even worse…beyond our shores? You can’t.

Before I explore this phenomenon, and how to cope with it, let’s do the numbers.

The major U.S. stock indices closed mostly higher Monday, modestly extending last week’s rally. They performed as follows: the Dow Jones Industrial Average +0.28%; the S&P 500 +0.13%; the NASDAQ -0.43%; and the Russell 2000 +0.60%. We’re still in a bear market, but stocks are well off their June lows.

Watch This Video: The Bear Gets Milder…For Now

In pre-market futures contracts Tuesday, the indices were trading lower in the wake of an announcement by Walmart (NYSE: WMT) that the retailing giant was cutting its quarterly and full-year profit estimates because of inflation.

The bellwether big box chain warned that rising prices, especially for food, were prompting consumers to cut back on discretionary purchases. Walmart’s shares plummeted in early trading, dragging down a bevy of other retailers as well as the broader market.

Before the opening bell Tuesday, General Motors (NYSE: GM) released Q2 earnings that missed estimates, citing supply chain SNAFUs and chronic shortages of materials such as semiconductors. The Detroit vehicle maker reaffirmed its earnings outlook for full year 2022 but noted that it was cutting spending due to an expected slowdown in demand.

Investors are bracing for several key economic reports this week, notably the fed funds target rate (Wednesday); second-quarter U.S. gross domestic product (GDP) growth and initial jobless claims (Thursday); the personal consumption expenditures (PCE) index, and consumer spending and sentiment (Friday).

If the Q2 GDP number shows negative growth, as some analysts expect, it would officially herald a recession in the United States. PCE, the Federal Reserve’s preferred inflation gauge, is expected to be elevated but perhaps with signs of cooling.

A world of worry…

If you listened to the disingenuous partisans on cable news, you’d think that inflation right now is a distinctly American problem, caused by American politicians. It’s not.

Inflation is a worldwide dilemma, with the U.S. actually suffering less than other countries. In June, consumer prices in the U.S. jumped 9.1% year-over-year; during the same period, they rose 9.6% throughout the European Union (see chart).

The major causes for global inflation are supply chain disruptions caused by the Russian-Ukraine war, as well as supply-and-demand imbalances originally sown by the “black swan” of the global coronavirus pandemic.

We’ll get a better idea about inflation’s path when the U.S. PCE index is released on Thursday. The PCE increased 0.6% month-over-month in May 2022, higher than 0.2% in April. However, the annual rate remained unchanged at 6.3% after hitting a record high of 6.6% in March.

Excluding food and energy, the so-called “core” PCE inflation rate in May eased to 4.7% from 4.9%, below forecasts of 4.8%. Let’s hope this salutary trend continues. One positive sign has been the sharp decline of global commodities prices since June.

In the meantime, if you haven’t done so already, you need to add an inflation hedge to your portfolio. It’s still not too late. An effective inflation hedge, one with global reach, is gold.

At least 25% of your portfolio should be devoted to hedges. As part of your hedges sleeve, about 5% – 10% should be in precious metals, notably gold.

I prefer gold mining stocks to physical bullion or funds. To find out why, click here for our special report on gold. Our report pinpoints an exciting small-cap gold miner that’s positioned for explosive gains.

John Persinos is the editorial director of Investing Daily.

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