With the country’s continued reopening, commodity prices have jumped everywhere. On this week’s “ETF Edge”, Tom Lydon, CEO of ETF Trends, Mark Yusko of Morgan Creek Capital Management, and Steve Grasso of Stuart Frankel assess inflation risks with Leslie Picker of CNBC.
Everything from petroleum and lumber to soybeans and even rubber has increased. Regarding inflation issues, Lydon explains how advisers were asked weekly about it, and since last fall they were really talking about inflation with higher rates. With the various price increases for food, gasoline, homes and basic commodities, there is cause for concern.
“This is the first time in 20 years that we’ve started to see these types of spikes,” Lydon added.
With that in mind, there are a few ETFs that match the current situation. the Direxion Auspice Broad Commodity Strategy ETF (COM). This actively managed fund breaks down 12 different commodities and uses them using a trend following technique.
However, the largest diversified commodity fund is the Invesco Optimum Yield Diversified Commodity Non K-1 ETF (PDBC) strategy. This fund is for those who want a basket of commodity futures and don’t care. And the lack of hassle due to lack of K-1 is helpful, especially given the worry over time with commodity based ETF strategies.
A Goldilocks environment
Turning to Grasso’s thoughts on the inflation outlook for growth versus value, he thinks the market is almost in a Goldilocks environment as everyone is looking for rates to climb, which could happen. However, President Powell is sitting on rates, and the 10-year is sitting in a good place where growth and value can really work.
For Yusko, he thinks it might be a good idea to take some money off the table. It comes from the success of the first trimester and how everything could be evaluated. As a result, anything back could be due to inflation in the second quarter, which could scare investors. So a spike in inflation could cause people to sell high-growth stocks, not to mention the threat of higher capital gains taxes, only pushing the problem further.
Yusko adds, “There might be places to hide, but I think the markets will be quite volatile during the summer and fall. You’d better collect some cash, sit down, and then buy things on sale in the fall. “
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