The professions of “reflation” are resurfacing.
Travel and leisure stocks gained momentum this month, with exchange-traded funds such as Invesco’s Dynamic Leisure and Entertainment ETF (PEJ), US Global Jets ETF (JETS) and AdvisorShares’ Hotel ETF (BEDZ) all of which increased sharply.
The stock is as much about diversification as it is about warm weather ahead and the easing of Covid-19 restrictions, ETF Trends CEO Tom Lydon told CNBC’s “ETF Edge” this week.
“We are seeing rising interest rates and the threat of higher interest rates here in the United States, but overseas, not all developed countries are suffering from this threat,” he said. Lydon in Monday’s interview.
“People are diversifying into areas like emerging markets, where it’s not just an opportunity to get a better return and where you also won’t be threatened by central banks necessarily being so hawkish here in the United States,” he said.
Another way to diversify is to invest in inflation hedges such as the AXS Astoria Inflation Sensitive (PPI) ETF, Astoria Portfolio Advisors founder and CEO John Davi said in the same interview.
“Typically after a recession you get this higher wave in value, cyclical, inflation-sensitive stocks, so about a year and a half ago we put together a formal inflation-sensitive model portfolio,” said Davi, which is also his company’s main investment. agent and portfolio manager of PPI.
The ETF primarily holds banking, energy, industrials and materials stocks, historically the four best performing sectors after a recession, Davi said. The ticker is a nod to the widely tracked Producer Price Index, the US government’s indicator for wholesale prices.
With these prices on the rise, investors and advisers should allocate 5-10% of their portfolios to inflation-focused products such as Davi’s, he said.
“The CPI is 7%. When I look at the world I see inflation closer to 15%, even higher when I look at the costs of goods and groceries and house prices,” Davi said. . “If I was a financial advisor, I would really look at your portfolio and tell you what you can do on margin to protect yourself against inflation?”
The PPI is up nearly 5% since the start of the year.
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