Bringing you live news and features since 2006 

Hedge against rising inflation expectations, says Barclays Wealth

RELATED TOPICS​

Barclays Wealth says actual or realised inflation will not be a problem, but rising inflation expectations could pose a threat to long-dated nominal bonds.

The company’s Compass Investment Strategy EMEA report states that for any investment portfolio expectations is similar to that of rising inflation itself. Whether or not inflation eventually occurs, investors will move to sell assets such as long-term fixed rate bonds, which perform poorly in inflationary environments, and bid up the prices of popular inflation hedges, such as commodities and real estate.

The report also says investors should maintain investments in Asia but be selective. Rather than buying an index, Barclays advocates active management in Asia or ‘thematic’ portfolios such as infrastructure. Investors can also consider Western companies with high levels of Asian revenue.  
 
In addition, Barclays believes investors should not settle for zero per cent in cash portfolios. High-quality short-dated bonds still offer a substantial pick up in yield versus cash or short-dated government bonds.

It says investors should add exposure to the Brazilian Real. Brazil offers an attractive inflation-adjusted interest rate of 4.5 per cent. The BRL continues to look cheap and should strengthen further against developed currencies.

According to the report, the decline in Q2 US GDP turned out to be a little smaller than economists expected, and Q3 should see a return to growth. However, the downward revisions to Q1 suggest that the hole the economy is climbing out of is even deeper than seemed likely a quarter ago.

The UK economy’s recent performance has been disappointing, the report says. By contrast, the French and German economies unexpectedly expanded in Q2. That said, the detailed statistics do not point towards an accelerating recovery.

Emerging markets – especially those in Asia – are returning to growth, most notably in China where the government has been successful in boosting economic activity.

Aaron S. Gurwitz, head of global investment strategy at Barclays Wealth, says: ‘We no longer want to leave the impression that we’re more worried about the potential pain of a double-dip than the opportunity cost of missing a continuing rally. Investors whose portfolios are still positioned defensively should move toward a normal risk posture.’

Latest News

News came last night from the US that the SEC has approved CBOE’s proposal to list and trade VanEck’s spot..
Irish domiciled funds surpassed EUR4.3 trillion AuM (Assets under Management) at end-March 2024, a 15 per cent increase in net..
European white label ETF platform, HANetf, has announced its total assets under management (AUM) has now exceeded USD4.31 billion...
New research from European ETF provider Tabula Investment Management shows investors are expecting improvements in ESG from the gold mining..

Related Articles

Timothy Rotolo, Range Funds
In 2023, Timothy Rotolo launched his business, Range Fund Holdings, the parent company for Range Indices and Range ETFs, followed...
Dan Miller, IQ-EQ
With just over a week to go till T+1 settlement begins in North America, Canada and Mexico, time is of...
Emily Spurling, Nasdaq
Last October’s ETF Express US Awards 2023 found Nasdaq winning Best Index Provider – ESG ETFs and Best Index Provider...
Vinit Srivistava, MerQube
Index provider, MerQube, launched in 2019, with the aim of providing a “technology-driven answer to the most complex, rules-based investment...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by