The expansionary economy will also come with rising inflation, and investors will have to adapt by focusing on real assets to hedge the risk.
“One of the things that we’re suggesting for advisors is to begin to think about a diversified portfolio real assets,” Arone said. “Things like TIPS. Things like real estate. Things like global natural resource stocks and commodities.”
For instance, the SPDR Barclays TIPS ETF (NYSEArca: IPE) provides broad exposure to Treasury inflation protected securities that automatically adjusts to inflation.
The SPDR S&P Global Natural Resources ETF (NYSEArca: GNR) and SPDR S&P North American Natural Resources ETF (NYSEArca: NANR) provide exposure to industries in energy, materials or agriculture that help consumers access the world’s resources.
Additionally, even though we are in an expansionary environment, there may be bumps along the way, and investors should have a game plan to hedge the potential volatility.
“Gold is our view in terms of how you want to manage volatility in a portfolio, so it’s one of those things that has a very low correlation to stocks and bonds, and should we get those bouts of volatility, investing in gold should be helpful in protecting a portfolio,” Arone added.
Investors can gain exposure to gold through physically backed commodity ETFs, like the SPDR Gold Shares (NYSEArca: GLD) and more recently launched SPDR Long Dollar Gold Trust (NYSEArca: GLDW), which tries to hedge currency risks associated with a strengthening U.S. dollar.