Inflation expectations of US consumers are rising as the conflict between Russia and Ukraine has led to soaring gasoline and food prices. At present, US inflation is at its highest level in 40 years.
Last week, the latest US consumer price index (CPI) in February rose 7.9 per cent from a year earlier, the fastest pace since June 1982. The prices of almost everything from commodities to cars to rents are rising in the United States. Not only in the United States, but also in the European Union, CPI rose 5.8% year-on-year in February, the highest on record, according to data released by Eurostat on February 2nd local time. Inflation in the UK is also at a 30-year high, and CPI in some emerging market countries remains high despite successive interest rate increases by central banks.
Nearly 90 per cent of traders (88 per cent) have begun to worry about inflation, according to a survey of traders' sentiment by Charles Schwab.
Inflation in the United States may pick up again
According to the new York fed's February consumer survey, the median one-year inflation expectation rose to 6 per cent from 5.8 per cent in January, equalling the record set in November 2021. Three-year inflation expectations rose from 3.5 per cent to 3.8 per cent, still below November and December levels.
Both short-and medium-term inflation expectations reversed the trend that fell sharply in January. In January, one-year inflation expectations fell for the first time since October 2020.
In the latest New York Fed survey, prices of all products and services are expected to rise in the coming year, including food, rents, natural gas, health care, college education and gold.
The figures suggest that consumers expect high inflation to last longer than they did a few weeks ago.
The situation in Ukraine and Russia has been suspended, and investors are holding their breath for the Fed's March interest rate meeting.
The Fed will hold monetary policy meetings on Tuesday and Wednesday, and the results of the meeting and monetary policy statement will be released on Wednesday. The Fed had already sent a clear signal that it would raise interest rates by 25 basis points to curb inflation.
Fed officials are expected to kick-start the rate-raising cycle by taking key steps to fight inflation at this week's policy meeting, raising interest rates from near zero. According to an article published by Bloomberg, traders have raised expectations of the Fed's possible tightening this year and are close to fully digesting expectations of seven 25 basis point rate hikes.
By the close of trading on Monday, the fourth round of Ukrainian-Russian negotiations had been suspended and the European Union announced new sanctions against Russia to abolish Russia's most-favored-nation trade status. The media also said that the United States may reach an agreement to lift sanctions on Venezuelan oil, which will help make up for the lack of Russian oil supply caused by the situation between Russia and Ukraine. International crude oil futures, which rose dangerously in intraday trading last Friday, fell sharply. Us Oil fell below the $100 mark for the first time in nearly two weeks, and both fell more than 8% in daily trading.
During the negotiations between Russia and Ukraine, European natural gas futures, which just ended days of slumping on Friday, resumed their decline, repeating an one-day double-digit decline after last Wednesday and Thursday.
London base metal futures fell across the board on Monday. Lun aluminum, which led the decline, fell 4.7% in one day, hitting its lowest level since late February after last Wednesday, and Lun copper rose in a row at the end of two days. Lun copper fell more than 2% to its lowest level since Feb. 28. Lunxi fell more than $1500, or more than 3.4%, in one day. Just after two days of losses, it closed below $43000 on Friday, falling to its lowest level since the end of January. Zinc and lead fell for four days in a row, while zinc continued to hit a new low since March 1, while lead hit an one-month low.
New York gold futures fell for two consecutive sessions, while COMEX April gold futures closed down 1.2% at $1960.80 an ounce, the lowest close since Thursday, March 3. Palladium futures fell for four consecutive days. NYMEX June palladium futures closed down 13.6% at $2417.6 an ounce, the lowest since Feb. 25 and down nearly 19% from the all-time closing high set on Friday, March 4.
With high global inflation, multiple attacks on geopolitical risks and a sharp rise in market uncertainty, how can investors have a higher success rate in trading?
Commodities hedge against inflation resurgence
Commodities are often the first way for investors to hedge against inflation in an inflationary environment.
John Williamson, an analyst at Gild Group, said a study by mangroup found that commodities generally performed best over the past eight periods of high inflation, with stocks underperforming and bond returns low.
Paul Tudor Jones, a prominent hedge fund manager on Wall Street, said recently that commodities seemed to be grossly undervalued compared to financial assets such as stocks. Even if the Fed tightens monetary policy aggressively later to combat inflation, commodities will still outperform financial assets such as equities.
Perhaps it is because of this consensus that the escalation of the crisis in Ukraine has been superimposed, with commodities from precious metals to food to energy soaring. Jeff Currie, a senior commodities analyst at Goldman Sachs Group Group, said that 19 of the 28 commodities are currently at a futures discount, meaning forward futures prices are lower than recent month futures prices. He pointed out that this shows that the current supply shortage in the commodity market is the worst since 1997.
Karen Karniol-Tambour, an executive at Bridgewater, the world's largest hedge fund, says commodities are the least underutilized hedge against inflation as the economy expands and prices rise. "what you need to look for are assets that will perform well in the face of economic growth and inflationary pressures. I personally prefer metals and carbon emissions. "he said.
What are the stocks and investment vehicles linked to commodities in the secondary market?
Generally speaking, commodities, agricultural products, financial stocks and real estate are the beneficiaries of the upward phase of inflation.
(1) Nonferrous metals
铝：
铜：
Gold:
(2) Oil and gas plate
Petroleum:
Natural gas:
(3) Coal plate
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(4) Agricultural products
(5) Financial industry
(6) High dividend assets
Inflation-linked stock ETF
John Davi, founder and chief executive of Astoria Portfolio Advisors, says another diversified hedge against inflation is to invest in ETF that bet on rising inflation, such as Astoria's, which went public in December and is directly named after the producer price index (PPI).$AXS ASTORIA INFLATION SENSITIVE ETF (PPI.US) $，The ETF mainly holds stocks in banking, energy, industry, materials and other sectors that usually perform best during a recession.
Smart Tree continuous Commodity Index Fund (GCC.US) $Positions are concentrated in energy, agriculture, metal futures contracts and bitcoin futures. Jeremy Schwartz, head of global research and executive vice president of WisdomTree Asset Management, said GCC was the best performing of the 75 ETF in WisdomTree in 2022 and was being used as an inflation hedge.
$AMPLIFY INFLATION FIGHTER ETF (IWIN.US) $Track inflation-sensitive stocks and commodity futures contracts. The ETF is mainly held by mining companies, real estate developers, land developers, home builders and real estate investment trusts, as well as agricultural products, gold and bitcoin.
ETF, a theme related to "inflation", attracted a lot of money at the beginning of the year. At the same time, some of the same type of ETF are speeding up the pace of listing.
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The Fed's most important indicator of inflation hit its highest level since 1983. How can the success rate of trading be higher?
All ETF with the word "inflation" in its name or ETF description recorded inflows last year, according to data compiled by Bloomberg.
Four of the ETF's returns exceeded the latest CPI reading of 7 per cent in 2021. They are:
$VanEck Vectors Real Asset Allocation ETF (RAAX.US) $, increased by 21.56% in 2021
$HORIZON KINETICS INFLATION BENEFICIARIES ETF (INFL.US) $, up 24.76% in 2021
$FIDELITY STOCKS FOR INFLATION ETF (FCPI.US) $, up 34.19% in 2021.
$ProShares inflation expectations ETF (RINF.US) $, up 16.21% in 2021.
Buffett teaches you how to fight inflation.
In a letter to shareholders in 1981, Buffett mentioned that two types of companies acquired by his Berkshire Hathaway had bright results, one of which happened to be well adapted to the inflationary environment. Such enterprises must have two characteristics:
(1) the ability to raise prices easily without worrying about a significant decline in market share and unit output (even when product demand is stable and production capacity is not fully utilized)
(2) the ability to reconcile a significant increase in corporate output (more due to inflation than real growth) with less need for additional capital investment.
Buffett believes that whether a company needs a lot of money to maintain its operations and profits is an indicator that investors should pay close attention to; and the ability of companies to price their goods is the primary indicator used to evaluate the company's business. If a company can raise the price without losing customers, it is doing well.
Finally, investors need to pay attention to whether a company needs to rely on loans to keep growing. After all, high inflation is bound to lead to higher interest rates. As a result, growth companies that often borrow to achieve growth are more vulnerable.
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