Inflation has a habit of exposing weak spots in investment portfolios.  Back in 2022, we saw something many portfolios weren’t built for: both equities and bonds falling at the same time.

For decades, bonds were expected to act as the stabiliser when equities struggled. That didn’t happen. Rising inflation and interest rates hit both sides of the traditional portfolio, and it became clear that diversification needs to go deeper than a simple stocks-and-bonds split.

For Irish investors, this matters even more. For many of us, our wealth is relatively concentrated, whether through property exposure, bank deposits, or a strong home bias in equities. Add in Ireland’s exposure to global energy prices (around 80% of our energy is imported), and inflation can hit particularly hard.

The war in Iran has created a fresh energy shock, pushing up prices and feeding inflation globally. For an energy-importing country like Ireland, that feeds through quickly to households and businesses.

At the same time, uncertainty around US war aims makes it difficult for markets to price what comes next. A de-escalation could lift sentiment.  An escalation would likely weigh further on risk assets.

Despite that, markets have had a solid start to the year, on the back of a good finish in 2025. European and emerging market equities, in particular, have performed strongly over the last six months, even if recent gains have been given back since the start of the Iran crisis.   For Irish investors, that’s a useful reminder of the value of looking beyond domestic assets and maintaining global diversification.

Three types of asset to navigate inflationary times

So what should you actually do?

Start by thinking about resilience rather than returns alone.

Equities still matter—but be selective. Dividend-producing companies with strong cash flow and pricing power are generally better placed than high-growth names reliant on future expectations. Sectors like oil and gas, pharmaceuticals, and financial services look advantegeous right now. A growing income stream can help offset rising living costs, particularly for those approaching retirement. Funds which are focused on high-yield equities look well positioned right now.

Hard assets are another area to consider. This includes precious metals, commodities, and infrastructure. Clearly the price of energy is going up – that’s the whole problem.  An exposure to it will place you on the winning side of that trade.  More generally, hard assets often generate income streams linked to inflation, which can help support portfolios over time.

Inflation-linked bonds are another possibility. These investments are designed to preserve the real value of your capital—something that becomes increasingly important as inflation rises.

Which areas are at risk as inflation returns?

On the flip side, there are some clear areas of risk.

Technology is one. After the valuation reset of 2022, enthusiasm around artificial intelligence helped drive markets higher and provide a route to recovery in markets. In 2026, the question is whether those valuations have become stretched again. Irish investors, often heavily exposed to global tech through funds, not to mention employment and tax dependence on these companies, should be mindful of concentration risk.

More broadly, portfolios that are heavily concentrated in equities are vulnerable to volatility—especially if inflation remains elevated. Certain sectors may also feel the strain more than others. Travel and transport businesses, for example, are highly sensitive to energy costs. When those costs rise sharply, margins can come under pressure.  Highly indebted companies are another weak point. Rising interest rates increase borrowing costs, which can quickly eat into profits.

And then there’s cash—an area where many Irish investors remain overexposed. While higher deposit rates may eventually come, they don’t necessarily keep pace with inflation. As we saw in recent years, central banks may increase interest rates in response to inflation, but it won’t be enough to prevent the erosion of the value of your cash savings.

The bigger picture is that investing through inflation isn’t about finding a single “winning” asset. It’s about building a portfolio that can cope with a range of outcomes.

For Irish investors, that also means making the most of the tools available. Tax-efficient structures, such as pensions and certain investment wrappers, can make a meaningful difference over time.

Above all, it comes back to having a durable investment plan. If your plan is diversified, tax-aware, and built with the long term in mind, it is well-positioned to navigate the changing conditions of 2026.