Inflation is one of the biggest concerns for investors this year. According to Bank of America’s latest Global Fund Manager
Survey
, professional investors now see inflation and not Covid as the biggest ‘tail risk’ for markets.
The Consumer Price Index for April rose 4.2%, versus consensus estimate for an increase of 3.6%. This was the sharpest increase since September 2008 and raised concerns that the US economy is overheating thanks to accelerating vaccine rollout, and massive fiscal and monetary stimulus.
It remains to be seen whether inflation is driven by temporary factors related to the pandemic, as the Federal Reserve says, or we are witnessing a historic shift after decades of low inflation. If you’re worried about rising inflation, it makes sense to add some ETFs to your portfolio that hedge against the possibility of rising prices.
Popular inflation hedges include gold, commodities, real estate, natural resource stocks and Treasury inflation-protected securities (TIPS). However, most TIPS have negative yields currently. Stocks with strong pricing power also tend to perform well during period of rising inflation.
The iShares North American Natural Resources ETF (
IGE
) provides exposure to oil and gas, mining, and forestry companies. Exxon (
XOM
), Chevron (
CVX
) and Newmont (
NEM
) are among its top holdings.
The Horizon Kinetics Inflation Beneficiaries ETF (
INFL
) invests in companies that could increase revenue in an inflationary environment. The Invesco DB Commodity Index Tracking Fund (
DBC
) holds futures tracking energy, precious metals, industrial metals and agriculture commodities.
To learn more about these ETFs, please watch the short video above.
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