For this week’s episode of ETF 360, ETF Trends’ CEO Tom Lydon and CIO Dave Nadig spoke with Jay Jacobs, Head of Research for Global X, as he discusses the rises in inflation and how ETFs like $COPX can help investors benefit.
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Looking at the economic front and what to expect from a continually reopening economy, Jacobs explains how the nearly 3 million vaccinations per day is helping to build an immunity across the U.S., which means the economy really can reopen. People will be able to travel, head to their offices, put their kids back in schools, all of which will take away the fear that has kept the economy constrained over the last few months.
“This is really the first step towards economic reopening,” Jacobs adds.
Supply And Demand Is A Key Inflation Factor
When considering what will happen when the supply and demand problem begins to invert, there is the concern for whether or not inflation will set in. Jacobs does believe this is very possible. Looking at the demand side, well, with people being more able to do things they want to do outside and in public, the demand increases. On top of that, President Biden passed the $1.9 trillion economic stimulus, and a third of that is direct payments to individual consumers. This money ultimately goes into the economy, which is another way of boosting demand.
On the supply side, there are still constrained supply chains for semiconductors, mining, and timber. Plus, there’s a labor market that needs to be absorbed back into the economy to increase the supply of things such as flights.
Jacobs notes, “The supply chain problem is only lifting very slowly, and that’s creating an imbalance that’s causing inflation right now.”
When considering what advisors concerned about inflation can do for their clients, Jacobs suggests becoming more familiar with the nature of inflation to understand how to position a portfolio. There are areas where investors can get different types of inflation protection. Copper is one of these routes, as it’s a metal that has performed very well in inflationary environments for the past few decades. Another area that performs well with inflation is energy. As prices go up, it’s very easy for energy producers to pass through those higher costs by just selling oil for more money per dollar.
Many advisors are looking into very specific planes within both of those spaces. For copper miner stocks, there’s an ETF, the Global X Miners Copper Fund ($COPX), which looks at this from a global perspective. For energy, many advisors are looking at MLPs again, which works for another ETF, the Global X MLP Fund (MLPA).
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