Hedging Inflation and Rising Rates:
Strategies to Consider

WisdomTree’s house view, informed by our Senior Investment Strategy Advisor, Wharton Professor Jeremy Siegel, is for inflation to rise materially over the coming years. Professor Siegel has called for a *20% cumulative increase in the price level based on the increase in money supply figures.

Yet, interest rates remain near historic lows. Given the unprecedented level of fiscal and monetary stimulus, months of pent-up demand, normalization of supply chains and rollout of effective vaccines, we expect to see higher inflation translate to higher interest rates in the years to come.

 

*Source: Another Episode of "That '70s Inflation" - Jun 17, 2021

1. Mitigate Portfolio Duration

In our current environment, increased attention has understandably been focused on the reflation trade. We believe it’s prudent to mitigate overall duration risk by implementing strategies that seek to reduce or hedge it out. To that end, investors should consider the time-tested “barbell” approach to fixed income investing. It attempts to take “rate calls” out of the process, enhance yield and mitigate potential rate risk. We offer three barbell solutions for investors to consider, based on their income needs and risk parameters:

More About Our Barbell Strategy

In addition to the three barbell options, we provide an income-oriented solution that can serve as a complement to a core fixed income strategy, the WisdomTree Yield Enhanced U.S. Short-Term Aggregate Bond Fund (SHAG).

2. Add Exposure to Broad-Based Commodities Strategies and Emerging Markets with a Commodities Tilt

As we anticipate the likelihood of rising rates and other inflationary pressures, investors may want to consider:

GCC
WisdomTree Enhanced Commodity Strategy Fund
The Fund is an actively managed exchange-traded fund and intends to provide broad-based exposure to the following four commodity sectors: Energy, Agriculture, Industrial Metals, and Precious Metals primarily through investments in futures contracts.
Details  
0.55%
Expense Ratio
12/21/2020
Inception date
DEM
WisdomTree Emerging Markets High Dividend Fund
The Fund seeks to track the investment results of high-dividend-yielding companies in the emerging markets region.
Details  
4.03%
12-Month Dividend Yield
(As of 05/31/2021)
0.63%
Expense Ratio
07/13/2007
Inception date
Performance is historical and does not guarantee future results. Current performance may be lower or higher than quoted. Investment returns and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
12-month yield is calculated using the weighted average trailing 12-month distribution yields of the constituents. Funds incepted less than 12 months do not have a trailing 12-month dividend yield.

Please click on a Fund and see the Performance tab for fund standardized performance, and see the Details tab for fund-specifc links for yield, most recent month-end performance and a prospectus.

3. Hedge Inflation with Dividends

During periods of sustained or transitory inflation, higher business costs have typically been passed on to the consumer through price increases – so earnings and dividends have tended to rise. Over the last 60 years, S&P 500 dividend's growth has more than outpaced inflation—and that includes the peak period of the 70s and 80s when rates averaged over 6%.* We believe equities can give investors a long-term inflation hedge, and income from dividends can be an attractive way to participate in the current inflationary impulse.

*Source: Dividend Monitor, p.17 - As of 5/28/2021.

Learn more about WisdomTree's family of Domestic Dividends ETFs.

4. Complement Core Stock and Bond Allocations

with managed futures strategies that can diversify portfolios with strategies that dynamically allocate across asset classes both in long and short direction:

WTMF
WisdomTree Managed Futures Strategy Fund
The Fund seeks to achieve positive total returns in rising or falling markets that are not directly correlated to broad market equity or fixed income returns.
Details  
0.42%
12-Month Dividend Yield
(As of 05/31/2021)
0.65%
Expense Ratio
01/05/2011
Inception date
Performance is historical and does not guarantee future results. Current performance may be lower or higher than quoted. Investment returns and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost.
12-month yield is calculated using the weighted average trailing 12-month distribution yields of the constituents. Funds incepted less than 12 months do not have a trailing 12-month dividend yield.

Please click on a Fund and see the Performance tab for fund standardized performance, and see the Details tab for fund-specifc links for yield, most recent month-end performance and a prospectus.

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