IAs nflation continues its rise, advisors are working to reposition portfolios to adapt to the new market environment. Amplify ETFs provides some insight and suggestions for potential opportunities in a Recent webcastsLara Crigger (managing editor of ETF Trends, ETF Database) moderated the discussion. The discussion will cover topics such as what investments benefit from inflation, two stock characteristics currently attractive options to core equity portfolios, finding above-average income when rising rate environments are occurring, and the benefits that active management can bring during volatility.
Christian Magoon, founder of Amplify ETFs and COO, explained that this is the first time advisors have had to apply inflation hedges in their portfolios since the 1970s. 2021 marked the 12ThYear of a bull market for the economy. However, that bull run has seen drawdowns, sometimes as high as 20%.
The risks that markets are now facing and looking ahead include geopolitical threats, COVID-19 variants rising interest rates and inflation. The S&P 500 has experienced a shock that was negative in the short-term, but then saw it gain over a year.
Russia is not good for the markets in the near term, and there could be more. But, we notice that these types of shock events tends to get worked out over time by the markets and indeed, the S&P has been capable of responding positively, Magoon said. In the midst of this Russian-led storm, it is worth considering.
Magoon also discusses the estimated COVID-19 variants’ schedules and the gradual economic impact reductions that have occurred with each variant. Finally, Magoon moves on to discuss rising rates impacts on stocks and the surprising positive performance of the S&P 500 in rising rate times.
Michael Venuto is co-founder and CIO at Toroso Investments. He discusses inflation and the rise in commodity prices. He also discusses the diversification benefits that commodities investing can provide. Venuto makes it a point to emphasize the importance of investing in multiple commodities, as they all behave differently in short-term and are volatile.
2 Investing Strategies in an Inflationary Climate
More than half the advisors who participated in the call said that they used dividend-paying stocks for their clients’ income. Kevin Simpson, founder and CIO at Capital Wealth Planning, LLC, speaks about the current market and the importance to invest in companies that are actively growing their dividends for retirement.
You brought up the recession problem. We might be capable of avoiding stagflation, because we have low interest rate. Stagflation is a strange thing. It’s a shrinking economy with rising rates. Simpson says that we still have low unemployment. One thing I will tell you is that if we do enter a recession, which I believe is more likely than most strategists, I believe it will be less severe than previous recessions.
The Amplify CWP ETF (DIVO), Enhanced Dividend Income ETF The fund seeks to invest in mega-cap dividend growth companies and uses a covered calling component that provides some downside protection as well the possibility of additional income.
Venuto turns the talk on its head Amplify Inflation Fighter ETF (IWIN)Explains that real inflation is for investors a combination currency debasement (such a stimulus and increased printing money) and rising cost of goods. This can be caused by a variety factors such as supply chain issues, geopolitical tensions and others. Real inflation benefits include gold, bitcoin, land, and commodities REITs, real-estate technology, as well as consumer commodities that fight rising cost of goods.
Venuto explains that we have combined the ability to use equities which should be inflation-fighters and commodities that should also be inflation-fighters in IWIN.
The portfolio’s commodities section can contain up to 50%. It contains both commodity futures as well as ETFs. The equity portion includes more traditional inflationary allocations like homebuilders and asset miners. IWIN doesn’t contain traditional REITs, but does include commodity REITs such farmlands.
Financial advisors are interested in learning about income opportunities in an inflation environment. You can watch the webcast on demand here.
These views and opinions are solely the author’s and do not necessarily reflect the views of Nasdaq, Inc.
