Huemmer & Crigger on Real Assets

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In times of skyrocketing inflation, investors are looking for what real assets can offer: the potential for income and diversification.

The Bureau of Labor Statistics consumer price index (CPI) rose 8.5% in March from a year earlier, marking the fastest annual jump since 1981, eclipsing the previous 40-year high of 7.9% in February, the Bureau reported today. of Labor Statistics of the United States.

The energy index rose 11.0% in March following a 3.5% increase in February – the largest month-over-month increase in history after September 2005, which was affected by the devastation of Hurricane Katrina, Christopher Huemmer, principal investment strategist for FlexShares ETFs, told Exchange: One ETFs Live.

“Stock and bond prices are positively correlated, and that’s because it’s not growth that’s driving interest rate hikes, it’s inflation,” Huemmer said.

Real assets are a great way to augment a 60/40 portfolio for better support during times of inflation, according to Huemmer.

“Real assets are the classic inflation hedge,” Lara Crigger, editor of ETFs Trends and ETFs Database, says. “When people think inflation is rising, they think of real assets, and [real assets have] doing very well year-to-date and on a one-year basis; we saw the GSCI increased by more than 50% over the past year.

For investors wondering if it’s too late to add real-asset exposure to a portfolio, Huemmer said to look at the drivers of the rise this year.

“The supply chain problem still exists today,” Huemmer said, pointing to the zero-covid politics, in which the country locks itself when covid tariffs are reaching a certain level, recently impacting machinery and two of Asia’s largest seaports.

And while the old adage says the cure for high energy prices is high energy prices – which means that when energy prices are high, every producer or exploration company drills more, creating an oversaturation of oil driving down prices – this does not happen in the current environment.

“Over the past 20 years, oil companies have gotten smarter about saying, ‘Hey, let’s not invest too much,’ so CAPEX expenses have come down significantly,” Huemmer said.

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