Inflation Heads Higher!
What’s that thing called when prices are persistently moving higher?
Oh yeah! Inflation!
The latest Consumer Price Index numbers from the Labor Department show inflation is running at a 2.9% annualized pace, which is the hottest pace in six years.
Worse yet, the rate of inflation is headed even higher.
Why? A very tight labor market is pushing wages higher, raw material costs are on the rise, and higher tariffs on critical raw materials like lumber, aluminum and steel have yet to work their way into the inflationary food chain.
Trump has already slapped $34 billion of tariffs on Chinese imports but he is threatening to tack on another 10% tariff on an additional $200 billion in Chinese goods.
That’s on top of the tariffs on the European Union, Canada and Mexico, which resulted in retaliatory tariffs on U.S. exports.
If inflation does rise even higher, the stock and especially the bond market, could get clobbered.
The good news for you is, there are ways to profit from inflation.
Here are a few ETF funds you might want to consider to protect your portfolio:
iShares TIPS Bond ETF (TIP): TIPS stands for Treasury Inflation Protected Securities and these specialized bonds are specifically designed to pay higher yields when inflation rises.
SPDR S&P Banks ETF (KBE): Banks stocks have historically done well when inflation is rising because the spread between short-term and long-term interest rates increases. That bigger spread translates into bigger profits for banks.
United States Commodity Index Fund (USCI): Commodities — industrial metals, energy, food — have outperformed both stocks and bonds during periods of high inflation.
Guggenheim Timber ETF (CUT): Most investors don’t consider timber, but it’s one of the most promising inflationary assets you can own. From 1973 to 1981, inflation averaged 9% a year while timberland increased by 22% a year.
SPDR Gold Shares ETF (GLD): Gold is the ultimate, albeit volatile, hedge against inflation and could produce oversized gains.
Inflation has been muted for years, but it is a long-term threat to your portfolio.
Not to worry. As income investors, we’re always on the look out for alternative streams of steady income, no matter the circumstances.
The above ETFs are effective inflationary hedges for your portfolio.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch