Given the continued reopening of the country, commodity prices have surged all over. 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 weigh inflation risks with CNBC’s Leslie Picker.
Everything from oil to lumber to soybeans to even rubber has ramped up. As far as inflation concerns go, Lydon explains how advisors have been surveyed every week in this regard, and since last fall, they were really about inflation arriving with increased rates. Given the various price rises in food, gas, homes, and commodities, there is a cause for concern.
“It’s the first time in 20 years where we’ve started to see these types of spikes,” Lydon added.
With this in mind, there are a couple of ETFs that fit the current situation. The Direxion Auspice Broad Commodity Strategy ETF (COM). This actively managed fund breaks down 12 different commodities and uses them on a trend following technique.
However, the biggest diversified commodity fund is the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC). This fund is for those who want a basket of commodities futures and not worry about it. And the lack of hassle due to the lack of K-1s is useful, especially given the concern over time with commodity-based ETF strategies.
A Goldilocks Environment
Shifting over to Grasso’s thoughts on the inflation prospect regarding growth versus value, he believes the market is almost in a Goldilocks environment, as everyone is looking for rates to spike higher, which could happen. However, Chair Powell is sitting on rates, and the 10-year is sitting out in a good spot where growth and value can actually perform.
For Yusko, he believes it could be a good idea to take money off the table. That comes from the success of Q1 and how everything could be priced. As a result, having everything go up could come through inflation in Q2, which could scare investors off. So, a spike in inflation could get people to sell off the high growth stocks, let alone the threat of higher capital gains taxes, only pushing the problem further.
Yusko adds, “There could be places to hide, but I think the markets will be pretty volatile through the summer and into the fall. You’re just better to raise some cash, sit it out, and then buy some things on sale in the fall.”
For more market trends, visit ETF Trends.