Inflation Sets New Records, There’s Still Time to Add Real Assets Exposure | ETF Trends

U.S. inflation has continued to climb to its highest rate in 40 years, erasing previous hopes that inflation had peaked in April.

The headline Consumer Price Index (CPI) has climbed by 8.6% over the past year, putting pressure on the U.S. Federal Reserve to further tighten policy to restore price stability.

CPI increased 1.0% in May on a seasonally adjusted basis after rising 0.3% in April, the U.S. Bureau of Labor Statistics reported on Friday. The increase was broad-based, with the indexes for shelter, gasoline, and food being the largest contributors. After declining in April, the energy index rose 3.9% over the month with the gasoline index rising 4.1% and the other major component indexes also increasing. The food index rose 1.2% in May as the food at home index increased 1.4%.

The all items index, which increased 8.6% for the 12 months ending May, marks the largest 12-month increase since the period ending December 1981. The energy index rose 34.6% over the last year, the largest 12-month increase since the period ending September 2005. The food index increased 10.1% for the 12-months ending May, the first increase of 10% or more since the period ending March 1981, the U.S. Bureau of Labor Statistics reported.

Real assets are a great way to augment a portfolio for better support during inflationary periods.

The FlexShares Morningstar Global Upstream Natural Resources Index Fund (GUNR) is a unique product in the Commodity Producers Equities ETFdb Category. GUNR focuses on the “upstream” portion of the natural resources supply chain, maintaining meaningful exposure to the water and timber industries along with positions in companies engaged in energy production, metals extraction, and agriculture, according to VettaFi. 

The highly liquid fund has $8.9 billion in assets under management and charges an expense ratio of 46 basis points. 

GUNR comprises many well-known stocks, including Exxon Mobil, Chevron Corporation, ConocoPhillips, and Tyson Foods. While it offers some exposure to mid-cap stocks, it is tilted heavily toward large- and mega-cap stocks, including Big Oil and major mining firms. 

With 112 individual components, GUNR offers relatively deep exposure to the global commodity sector. The fund offers exposure to North, Central, and South America (54.12%), Europe (33.36%), and Asia Pacific (12.52%). Within that, U.S. stocks comprise 37.49% of the fund, trailed by Canada and the UK at 12.82% and 12.71%, respectively.

GUNR can be used in several different ways. Investors looking to add exposure to commodity-intensive equities might find this fund to be a valuable addition to a long-term, buy-and-hold portfolio. It can also be an effective way to establish more tactical, short-term exposure to the commodity industry.

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