Jason Bloom, Head of Fixed Income and Alternatives Exchange Traded Fund Product Strategy at Invesco, said industrial metals, especially copper, could rise in the coming years, and not necessarily because of inflation. Copper could benefit from its use in electric vehicles as well as in wind and solar power generation.
Daily business briefing
July 9, 2021 at 1:31 p.m. ET
“We consider a doubling of the copper price in the next five years to be justifiable,” he said. He also expects further price gains for oil and agricultural commodities.
“In the longer term, it is believed that as consumers become more prosperous in developed countries, they will switch to higher levels of protein,” he said, driving demand for cattle and pigs along with the corn and soybeans they feed.
Michael Arone, chief investment strategist at State Street Global Advisors, which operates many ETFs, said, “I think energy and commodity stocks are good value.” SPDR SSgA Multi-Asset Real Return ETF by State Street focuses on inflation. It’s a collection of ETFs that invest in real estate, commodities, and inflation-linked treasury securities. The fund achieved a return of 16.9 percent and an expense ratio of 0.5 percent through June.
While Mr Arone says he expects inflation to subside in the coming years, it is worth watching potential wage inflation. “I would be concerned if the average hourly wage increase came close to 4 percent,” he said.
Phillip Toews, CEO of Toews Asset Management, an investment advisor with more than $ 2 billion in assets under management, advocates a “small” allocation in a commodity index – “maybe 5 to 10 percent” – in client portfolios. Since bonds are vulnerable in periods of inflation, Toews recommends TIPS that offer the security of bonds along with explicit protection against possible inflation.
Switching between asset classes.
Some funds, such as the Fidelity Multi-Asset Income fund, have broad mandates that can offer internal protection against inflation. Adam Kramer, a manager for the Fidelity Fund, says he can invest in stocks, government bonds, investment grade corporate bonds, high risk bonds, preferred stocks, and convertibles, and he can change his asset allocation if necessary.