Consuelo Mack's WealthTrack: Guest: Richard Bernstein, CEO & CIO, Richard Bernstein Advisors:

Comments

• bee

  October 2018

  Thanks @Ted... I came across this article (looks like a 2015 publication):

  Assets Tied to Inflation
  
  It's probably wise to avoid assets that are closely tied to inflation right now (2015). Contrary to popular belief, the reason the Federal Reserve and other central banks around the world have kept interest rates low is because they have been fighting against deflation. Unfortunately, all this has done is kick the can down the road while adding excessive debts. When growth slows due to the reduced impact of central bank policies, those debts will be very difficult to pay off, which will be the beginning of economic contraction. When corporations can’t pay these debts, they will lay off employees. When employees are cut, consumer spending is reduced. There is nothing inflationary about this scenario. But …
  
  A savvy investor keeps ahead of a trend change. This is how investors maximize their potential. This change might not take place for a while, but it will take place, and it could present one of the best investment opportunities to occur in a long time...Back in 2012, Fidelity back-tested nine assets against inflation on a year-to-year basis between 1973 and 2012. No asset beat inflation 100% of the time, but there was a big difference in regards to which assets performed better at beating inflation.
  
  Here's the list.

  Preparing for Inflation:
  9 Top Assets for Protection Against Inflation
  
  And this from Lazard on Inflation hedges:

  It can be shown that the annual
  real returns of stocks trump the returns of bonds in years with rising
  inflation, and are almost always positive. Thus, the addition of stocks
  to bond portfolios offers both diversification and improved real value
  preservation in the event of inflation.
  However, the (short-term) inflation protection is limited because the
  correlation between real stock returns and inflation in the same year is
  negative. As inflation rises, real stock returns decline, but only become
  negative in an environment of extremely high inflation. But over long
  return horizons (of five or more years), stocks have historically offered
  inflation protection. Based on empirical evidence, equities provide
  relatively good inflation protection over the long term. This is because
  stock returns, with some degree of certainty, exceed the inflation rate
  due in part to the high long-term equity risk premium.

  Study (Pub 2012):
  lazardnet.com/lam/global/pdfs/Literature/Part2-EquityInvestmentsAsAHedgeAgainst_LazardResearch.pdf
• Rbrt

  October 2018

  See Bernstein’s website, also:
  http://www.rbadvisors.com/images/pdfs/Looking_for_risk_in_all_the_wrong_places.pdf
  
  “As we told the reporter, bear markets don’t typically occur when there is too much good news and investors are concerned the good news can’t continue. Bear markets are usually fueled by investors disregarding deteriorating fundamentals and rationalizing underperformance. That doesn’t seem true of the equity market, but rather seems to depict well today’s fixed-income markets.”
  
  I can’t abandon bond funds but I have added rising rate funds to my stable.
• Rbrt

  October 2018

  Finally watched this - good stuff. One takeaway is that so much of public policy is pro-inflation: fiscal spending, tax cuts, tight labor market, punitive trade policy, oil sanctions. He says look to energy, materials and industrials. He points to commodity ETFs - as I recall, back when the PIMCO commodity fund was a thing, oil companies were a much better investment.