How to Manage Your Money If Inflation Increases

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Industrial metals, particularly copper, could rise in the coming years, and this isn’t necessarily due to inflation, said Jason Bloom, head of fixed income and alternatives exchange-traded fund product strategy at Invesco. Copper could benefit from its use in electric vehicles as well as in wind and solar power generation.

“We think that doubling the price of copper in the next five years is within reasonable limits,” he said. It also expects further gains for oil and agricultural commodity prices.

“There’s a longer-term view that as wealth increases in developed countries, consumers will switch to higher protein levels,” he said, encouraging demand for cattle and pigs, along with the corn and soybeans that feed them.

“I think energy and material stocks represent good value,” said Michael Arone, chief investment strategist at State Street Global Advisors, which manages many ETFs. State Street’s SPDR SSgA Multi-Asset Real Return ETF focuses on inflation. It is a collection of ETFs that invest in real estate, commodities, and Treasury Inflation-Protected Securities. The fund has yielded 16.9 percent through June and has an expense ratio of 0.5 percent.

While Mr. Arone says he expects inflation to decline in the coming years, potential wage inflation is worth watching. “To me, if average hourly earnings growth approaches 4 percent, that would be worrisome,” he said.

Phillip Toews, CEO of Toews Asset Management, an investment advisor with more than $2 billion in assets under his management, favors a “small” allocation of client portfolios to a commodity index — “perhaps 5 to 10 percent.” Because bonds are fragile during times of inflation, Mr. Toews says he recommends the security of bonds and TIPS, which provides clear protection against possible inflation.

Some funds, such as the Fidelity Multi-Asset Income fund, It has broad powers that can provide internal protection against inflation. Adam Kramer, director of the Fidelity fund, says he can invest in stocks, Treasuries, investment-grade corporate bonds, high-risk bonds, preferred stocks and convertibles, and change the asset allocation when appropriate.

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