Q: What are the implications of a stronger dollar on commodities?
A: Commodities have generally done poorly this year. One reason: a strong dollar has been a bit of a headwind for commodities, which are priced in dollars. Looking forward, a stronger dollar should continue to keep some sort of ceiling on commodity prices. To be sure, however, there are other reasons why commodities have done poorly recently. For instance, equities’ strong performance may be luring some investors out of poor performing commodities into stocks. In addition, concerns about rising rates have also likely hurt the asset class.
Q: Do you still favor physical real estate and broad exposure to commodity-producing countries as tools to combat rising inflation?
A: As I mentioned in a recent post, I’m not worried about inflation in the near term. That said, yes, I still like both inflation hedge options. But between the two, I currently prefer brick-and-mortar real estate exposure. Real estate prices are still relatively low and, unlike commodities, real estate can provide income.
Russ Koesterich, CFA, is the iShares Global Chief Investment Strategist.