Jason Bloom, head of fixed income and alternatives exchange-traded fund product strategy at Invesco, said industrial metals, especially copper, could rise in coming years, and not necessarily because of inflation. Copper could benefit from its use in electric vehicles, as well as in wind and solar energy generation.
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“We think over the next five years it’s within the bounds of reason for the price of copper to double,” he said. He also expects further gains for the prices of oil and agricultural commodities.
“There is a longer-term view that as wealth grows in developed countries, consumers will shift to higher protein levels,” he said, spurring demand for cattle and hogs, along with the corn and soybeans that feed them.
Michael Arone, chief investment strategist at State Street Research, which runs many E.T.F.s, said, “I think energy and materials stocks represent good value.” State Street’s SPDR SSgA Multi-Asset Real Return E.T.F. focuses on inflation. It is a collection of E.T.F.s that invest in real estate, commodities and Treasury Inflation Protected Securities. The fund returned 16.9 percent through June and has an expense ratio of 0.5 percent.
While Mr. Arone says he expects inflation to ebb in the years ahead, it’s worth monitoring potential wage inflation. “To me, if the average hourly earnings rise comes close to 4 percent, that would be concerning,” he said.
Phillip Toews, chief executive of Toews Asset Management, an investment adviser with more than $2 billion in assets under management, favors a “small” allocation to a commodities index — “perhaps 5 to 10 percent” — in client portfolios. Because bonds are vulnerable in inflationary periods, Mr. Toews says he recommends TIPS, which provide the safety of bonds along with explicit protection against possible inflation.
Switching Among Asset Classes.
Some funds, like the Fidelity Multi-Asset Income fund, have broad mandates that can provide an internal hedge against inflation. Adam Kramer, a manager of the Fidelity fund, says it can invest in equities, Treasuries, investment-grade corporate bonds, high-risk bonds, preferred stock and convertibles, and he can alter its asset allocation when appropriate.
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