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How to Manage Your Money if Inflation Flares

The rise in industrial metals, particularly copper, in the coming years, according to Jason Bloom, head of fixed income and alternatives exchange-traded fund product strategy at Invesco, is not necessarily due to inflation. Copper’s use in electric vehicles, as well as in wind and solar energy generation, could be beneficial to the industry.

In his words, “we believe that the price of copper will double within the next five years.” He also anticipates that the prices of oil and agricultural commodities will continue to rise.

In the long run, he believes, as wealth increases in developed countries, consumers will shift to higher protein intakes, which will increase demand for cattle and hogs, as well as the corn and soybeans that feed these animals.

“I believe that energy and materials stocks represent good value,” said Michael Arone, chief investment strategist at State Street Research, which manages a number of exchange-traded funds. The SPDR SSgA Multi-Asset Real Return E.T.F. from State Street is primarily concerned with inflation. Investments in real estate, commodities, and Treasury Inflation Protected Securities are made through a collection of exchange-traded funds (ETFs). From January to June, the fund generated returns of 16.9 percent, with an expense ratio of 0.5 percent.

While Mr. Arone predicts that inflation will begin to decline in the coming years, it is still important to keep an eye on potential wage inflation. It would be concerning to him if the average hourly earnings increase came close to 4 percent, according to his estimation.

The chief executive of Toews Asset Management, an investment adviser with more than $2 billion in assets under management, prefers a “small” allocation to a commodities index in client portfolios — “perhaps 5 to 10%,” according to Phillip Toews. Because bonds are particularly vulnerable during inflationary periods, Mr. Toews advises investors to consider TIPS, which combine the safety of bonds with explicit protection from potential inflation.

The Fidelity Multi-Asset Income fund, for example, has broad mandates that can act as an internal inflation hedge by investing in a variety of assets. Fidelity fund manager Adam Kramer says the fund can invest in equities, Treasury securities, investment-grade corporate debt, high-risk debt, preferred stock and convertibles. He also says he has the ability to change the fund’s asset allocation as needed.


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