READ: What to Do With Inflation?

In a recent special video interview, VettaFi’s Financial Futurist Dave Nadig sat down and talked with John Davi, CEO and CIO of Astoria Portfolio Advisors to discuss inflation. They discuss many different topics regarding inflation in the video in preparation for their webinar that is set to take place on November 15 at 12 p.m. ET.

What to Do With Inflation?

Dave Nadig: Boy, I don’t understand inflation at all, and thank God I’ve got John Davi joining us here from Astoria to talk about it. John, what’s the positioning on inflation right now when you’re looking at the last set of prints? You pay more attention to this than anybody I know. What are you thinking for the next year on inflation, and what are we thinking for next week on inflation?

John Davi: So we’ve been consistent with our message that we thought inflation would be higher and sticky for longer. We’ve seen recently in the last couple of readings that it hasn’t really reached a crescendo, that it’s kind of ticked higher. So I think the irony of all this, Dave, is that, at the end of the day, the cost to own these inflation-sensitive assets is pretty cheap from a valuation standpoint.

So the P/E ratio of our ETF is 9. I’ve seen periods in my career where these energy stocks, these natural resource stocks are like 2025 P/E ratio. So I think if you look at the 1970s analogy, inflation was a problem basically for 10 years.

So we like owning these assets, and I think that we’re not trying to get myopic, OK, what’s the next print going to be? But how do you position your portfolio, which has so much tactic duration, and nominal bond exposure to where we think portfolios should be in the next three to five years, which has more inflation-sensitive assets and helps you get exposure to these areas in the market, which are pretty cheap.

Key Inflation Sensitive Assets to Have in Your Portfolio

Dave Nadig: Give me a quick rundown on them. When you’re looking at inflation-sensitive assets, is it as simple as just buying a little bit of TIPS and a little bit of energy? You guys pay a little bit more attention to it than that. Give me a quick hit. What are the key inflation-sensitive assets you think everybody should have in their portfolio?

John Davi: OK, so energy, materials, industrials, I think you want to own commodities, like physical commodities via the ETF, of course, and a little bit of TIPS also. But right now, I think those industrial stocks, they’re just so cheap that you want to home in on those at the moment.

Combination of Historical Inflation Projection and a Value Play

Dave Nadig: So almost a combination of historical inflation projection and also a little bit of a value play, right?

John Davi: Yeah, exactly. So here’s what I would have to say: The winners over the next three to five years, I wouldn’t say are going to be the same winners that we had in the prior decade. The prior decade was mired in deflation, low rates, and quantitative easing, and we’re done with that, right? We’re transitioning to this period now where it’s about inflation, quantitative tightening, higher real rates, and I think you want to own those value stocks, right?

So again, nothing stays up at the top forever, but these energy stocks, and material stocks, I think they do well to serve your portfolio from an inflation standpoint. And oh, by the way, if we really go into this onshore and reshoring global industrial renaissance here in the U.S., I think those are sectors going to benefit well.

Closing Thoughts

Dave Nadig: Great. Well look, we’re going to talk a little bit more about this next Wednesday. We’re doing a webinar. You can go to ETF Trends and register for that. We’d love to see you. I’m going to be grilling John for at least an hour on that. So I hope you’ll join us for that. And John, thanks for joining us. Cheers, everyone. Stay safe. Have a great day.

John Davi: Thank you.

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