Us stocks suffered their biggest reversal since the early days of the epidemic after the Fed announced its biggest interest rate hike since 2000. It was still unleashing a sexual rise on Wednesday, but there was a panic sell-off on Thursday, from orgy to howling overnight.

The market, which had reveled in the absence of aggressive interest rate hikes the day before, began to worry the next day because it would not solve the rising commodity prices and the pressure on the supply chain, triggering a sharp rise and fall in the market.

On the other hand, concerns about whether the economy can achieve a "soft landing" are spreading. Ian Lyngen, head of US interest rate strategy at BMO Capital Markets, said the message from the market on Thursday was clear and loud: raising interest rates risks triggering a recession.

Expectations of both inflation and recession are rising again.Previously, a number of Wall Street investment banks have continued to pay attention to the phenomenon of economic stagflation, and Chris Harvey, head of equity strategy at Wells Fargo & Co Securities, recently said bluntly."the risk of stagflation will be the primary theme in the second half of this year."。

Meanwhile,The first ETF betting on stagflation$MERK STAGFLATION ETF (STGF.US) $Will be launched this WednesdayThe fund focuses on the performance of assets that benefit directly or indirectly from persistent inflation or stagflation.

The first stagflation theme ETF launched

As the first ETF,STGF with the theme of stagflation in the market, the launch has attracted the attention of the market.Merk Investments CEO Axel Merk, fund manager of STGF, said STGF's investment strategy was to, in a stagflation environment similar to that of the 1970s (high inflation, bull market in commodities and rising real estate prices)Provide a portfolio with appreciation potential and sensitivity to inflation.The fund mainly tracks the price and yield performance of the Solactive stagflation index.

Basic situation of STGF Fund

Full name: MERK STAGFLATION ETF

Code: STGF

Date of establishment: may 3, 2022

Current price: $25.12 (closing price of 2022.5.5)

Listed Exchange: new York Stock Exchange High growth Board (NYSE-Arca)

Rate: 0.45%

Management style: active management

The investment portfolio of the fund is：55% mai 85% of us federal government inflation-protected bonds and 5% mai 15% of real estate, gold and oil.Among them, investment$Charles Schwab Corp TIPs ETF (SCHP.US) $The position accounts for more than 60%.

Although the launch is just in time, Cinthia Murphy of ETF, a think-tank, questions why it does not have a higher weight on goods.

"it's a good idea to launch a stagflation ETF, which gives investors the ability to invest in four different assets at the same time," Murphy said. "but it's a bit surprising that this ETF doesn't allocate commodities more widely. "

Charles Schwab Corp, the fund's largest position, is not doing well at TIPs ETF in the US, down more than 6 per cent so far this year. Although it outperformed the three major indices, it lagged relatively behind other inflation hedge funds.

Axel Merk said that.Despite the interest rate risk, TIPS remains "the most direct tool to help keep up with inflation".

What are the investment strategies during stagflation?

According to CNBC's Fed survey in May, the Fed is expected to raise interest rates sharply and cut its balance sheet over the next 16 monthsMost respondents believe that this process will end in a recession.

After the meeting, although Powell said there was a "good opportunity" to achieve a soft landing of the US economy, Motorola CEO did not agree. He pointed out, "the Fed should have raised interest rates faster."The possibility that the Fed's action will lead to a soft landing for the US economy andA mild recession is equally likely.」

When the conflict between Russia and Ukraine triggered a global commodity boom in early March, Wall Street warned that the global economy was facing a growing risk of stagflation. Now, more and more analysts believe that stagflation may become the number one risk in the market, and traders are constantly looking for hedging tools.

According to Bank of America Corporation's survey, fund managers have been reconfiguring their portfoliosThey poured into crude oil and other commodities and took long positions in resources and health care stocks.

Goldman Sachs Group believes that in the face of the increased risk of stagflation, the standard 60Universe 40 portfolio (60% of stocks and 40% of bonds) may not be an effective strategy.Commodities are still the best hedging tool.

Schroeder believes thatSome sectors, including public utilities, essential consumer goods and real estateWill be less affected by stagflation than other sectors because they are defensive against a slowdown and share prices are positively correlated with inflation.

As inflation expectations will be persistent and more sticky, investors may need to consider a more dynamic anti-inflation strategy, according to the chief executive of Laffer Tengler Investments, an investment firm. She pointed outSuch a portfolio would include real estate investment trusts (REITs), precious metals, energy commodities and robotics. Another theme that traders need to focus on is dividends.