On Thursday, the Bureau of Labor Statistics said consumer price inflation surged 5% on a year-over-year basis in May, good for the largest monthly increase since the global financial crisis.
That comes after an uptick in prices in April and as prices for everything from used automobiles to home furnishings are rising. Over the past year, gas prices are up a staggering 56.2%. Add those factors and more up and it’s not surprising advisors are fielding plenty of queries about inflation this year.
Predictably, inflationary pressures fuel chatter about what assets advisors should be allocating toward to protect clients from ravages of rising consumer prices. There are the old standbys of gold and Treasury inflation protection securities (TIPS) and real assets are an increasingly prominent part of the inflation-fighting conversation. Advisors looking for depth and diversification when it comes to beating inflation can consider model portfolio, including WisdomTree’s expansive lineup.
The issuer’s model portfolio suite features its own exchange traded funds as well as ETFs from third-party issuers. The offerings are global in nature, diversified at the asset class and market capitalization levels, and provide exposure to core and active strategies.
Getting Cyclical to Beat Inflation
With cyclical stocks back in fashion, strategies such as the WisdomTree Global Dividend Model Portfolio could be worthy of evaluation.
“Since the announcement of the Pfizer COVID-19 vaccine last November, we’ve seen a strong cyclical rotation out of the large-cap, growth and momentum factors that led the market for years and back into the factors that historically performed best during periods of economic recovery: value and small cap (with the bonus of a nice rally in dividend-paying stocks),” said Scott Welch, WisdomTree chief investment officer – model portfolios – in a recent note.
That model portfolio, which charges 0.36% per year, features both dividend growth and high payout ETFs, as well as a blend of domestic, developed, and emerging markets funds. For advisors, it’s notable that those traits, along with size and value advantages, are common across multiple equity-based model portfolios offered by WisdomTree.
“Because of the nature of many of the WisdomTree strategies we deploy in our models, most of them have distinct and explicit tilts toward smaller-cap stocks, dividend-paying stocks and value-oriented stocks,” adds Welch. “Perhaps somewhat uniquely, we also have explicit allocations to international and emerging market small caps.”
Both high dividends and payout growth have beaten rising consumer prices throughout history.
For more on how to implement model portfolios, visit our Model Portfolio Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
