I have had the same thinking recently. It is difficult because business may be somewhat insulated from inflation but they are less so from an economic slowdown. I have been trying to sell equities into the rally over the past few months, but it has been difficult in my mind buying bonds because of my fear that the authorities will just inflate their way out of this mess. Another possible benefit of owning stocks (esp. US large cap) is that in the event of a dollar decline they would benefit because demand for their exports would start to pick up and help profits.
Of course how much of the market’s earnings these days is real, especially in the financial sector? Companies are able to book the interest accumulated on option payment/neg am mortgages but not actually receive the money, how much of this will they collect? So I’m not sure I trust the current P/E of the market anyways.
What I have decided is that in the short term it is safer being more in fixed income/bonds, I would prefer cash but it is not always an option especially in 401(k)’s. In the intermediate term as the stock market corrects and the full gravity of the situation becomes known maybe start moving some money back into equities.
