ETFs
Inflation ETF Could Be in Ideal Position Even if Fed Cuts Rates
This is an exchange-traded fund designed to take advantage of higher rates.
But even if the Federal Reserve begins to cut spending this year, James Davolos of Horizon Kinetics believes that Inflation Beneficiaries ETF (INFL) is in a great location.
“We’re actually entering the maturity phase of inflation,” the firm’s portfolio manager Davolos told CNBC.Advantage of ETFs” this week. “I think we’re actually ideally positioned.”
Davolos expects a new world stuck with inflation between three and five percent.
“The Federal Reserve just admitted last week that we’re going to prioritize the economy and jobs and accept these higher inflation levels,” Davolos said. “I don’t think most wallets are properly designed for this.”
Horizon Kinetics created the Inflation Beneficiaries ETF in January 2021 as inflation began to rise following the Covid-19 pandemic quarantine. Today, Davolos views the fund as a strategic tool to diversify investors’ portfolios.
According to Davolos, the ETF’s goal is to protect portfolios in a higher, longer environment by investing in companies considered “asset light” and “capital light.” As of April 30, FactSet shows that top holdings in the Inflation Beneficiaries ETF include Wheaton Precious Metals, PrairieSky Royalty And Viper Energy.
So far this year, the ETF has underperformed the S&P500 by about five percent. But Davolos thinks gains from inflation-focused ETFs are more stable over the long term. that the current mega-cap rally.
“We are in a new reality. People continue to buy technology, “I don’t realize we’ve been higher for longer, and there’s a duration aspect to these titles,” Davolos said. “So I expect that to continue to reverse and reverse sharply as we go through the rest of this year.”
As of Friday’s close, the Inflation Beneficiaries ETF is up 30% since inception.