Many investors wonder if they need to change their investment strategies after inflation surpassed 7% and the inversion of what is known as the yield curve.

They are not wrong. We can see that U.S. stocks show decreased returns during periods of high inflation and after yield curve changes.

If inflation rises above 7%, then the median U.S. stock returns over the next 12 months was 7.3%. This compares to 10.3% when the inflation rate was less than 7%. The median inflation-adjusted yield of U.S. stock returns over the past year was 4.7%, while it was 9% for every other period.

This information can make it tempting to lower your stock allocation and invest in U.S. Treasurys. However, investors who followed these recommendations would be underperforming U.S. stocks by significant amounts.

The median inflation adjusted return is the one that occurs when inflation exceeds 7.7%. five-year U.S. Treasurys It was 2.6% for the next year. This is far less than the 7.3% annual return of U.S. stock during that same period. After every inversion of the yield curve since August 1978 was complete, the median inflation adjusted return for five-year U.S. Treasurys was just 3.9%, compared with 4.7% for U.S. stock returns over the following year.

This shows that U.S. Treasury bills won’t be the best option for investors who are looking to benefit from turbulent times.

Nobel laureates Kennth France and Eugene Fama came to similar conclusions in a paper they published in July 2019We have no evidence that stocks and Treasurys will outperform Treasurys in the future for periods between one and five years. Fama French created The Fama French-factor model. It highlighted that investors need to be prepared for volatility, periodic underperformance and other risks that may occur.

How can investors make sure their stock allocation is moved to U.S. Treasurys and cash?

Consider the long-term first.

High inflation may have a negative impact on stocks for a short time, but this relationship is not sustainable over a longer period of time. The median inflation-adjusted returns of U.S. stocks in the past two years after periods of high inflation were almost identical to those of the same period of low inflation (18.5% and 18.7%, respectively). This means that investors who have a longer time frame should not fret about how inflation will affect their portfolio.

Next, remember that things could change.

Although it is true that inversions of yield curves usually mean that U.S. stocks are going to underperform, and that we’ll experience recession within 12-24 months, that’s not always true. If you were to cash out U.S. stocks after the latest yield curve inversion, August 2019, then you will have lost 68% of your total return.

Keep going.

Although it is tempting to change your portfolio during panic, data shows that the majority of retail investors remain steadfast. Yahoo Finance reportedOnly 3 percent of Fidelity investors stopped contributing their 401(k), and only 11% made active trades on the Vanguard market crash in March 2020.

Although it might seem that investors panic at the worsening economic environment, the data indicates that they are usually in the minority of skittish investors.

Nevertheless, if your concern about the markets or macroeconomic uncertainties is not resolved, you can read the following words by Jeremy Siegel. He’s a world-reknowned expert on financial markets, and professor at Penn. “Fear has a better grasp of human actions than the overwhelming weight of historical evidence.”

— By Nick Maggiulli, chief operating officer at Ritholtz Wealth Management