Displaying items by tag: yields

In the face of record inflation, the Virtus Real Assets Income ETF (VRAI) has done extraordinarily well, up 19% year-to-date, and significantly beating the S&P 500, which is up 14%. On top of this, the ETF generates compelling income of 3%, well above the 10 Year US Treasuries at 1.5%.

Investing in real assets is a winning strategy in an inflationary environment because tangible assets such as real estate, natural resources and infrastructure have intrinsic value. VRAI is the first ETF focused on real assets. Additionally, because of VRAI’s focus on income-generating real assets, VRAI also generates attractive income.

In terms of ETF construction, VRAI is designed to be one-stop solution for real asset exposure. VRAI consists of 90 US-traded companies, equally divided between real assets, natural resources, and infrastructure. Companies are filtered based upon market capitalization and selected based upon dividend yield. All stocks are equally weighted to ensure portfolio diversification.

Finally, in terms of costs, VRAI is very competitively priced at 55 bps (0.55%). This stands stark contrast to most energy and real estate ETFs and mutual funds, which typically cost over 100 bps (or 1%).

For more information on the investment case, check out this research piece produced by Virtus

n.b. This is sponsored content and not FINSUM editorial

(New York)

The market has been nervous for months about growing inflation in the US. The Fed has tried to appear sanguine about it, and has so far done a decent job of keeping fears in check. However, a blowout inflation report this month, as well as more hawkish comments this week, means that anxiety is rising strongly again. And according to Jeffrey Gundlach, the fears are justified as he believes inflation will not be “transitory” as central bankers have been predicting. One of his core arguments is that inflation may become a self-fulfilling prophecy, where consumers start stocking up on items now to avoid future price rises, which in turn causes shortages and drives prices higher.

FINSUM: The self-fulfilling prophecy is a good near-term argument, but we have a longer-term one: demographics. The largest generation in the history of the US—Millennials—are coming into their peak earning and buying years, which is creating demand for literally everything, and supply is tight across almost all industries. Inflation looks inevitable.

(New York)

There has been a lot of worry about bond prices recently. With inflation rising steeply and the bond market still regaining its footing, it is easy to worry about another sharp selloff. Because junk bonds are on the riskier end of the fixed income spectrum, many think there is more risk in this area. However, the opposite is true, especially in a rising economy. Because they tend to have higher yields and shorter terms, junk bonds naturally have less rate risk. Additionally, because of their underlying financials, junk bonds have a lot to gain in a rising economy. For example, they may be likely to get upgraded, and because of their relatively weak financial positioning to begin with, even minor gains can mean substantial valuation improvements.

FINSUM: If you need income, then high yield bonds are one of the best bets given their natural rate hedging and their potential for significant financial improvement.

(New York)

With the huge CPI number hitting the tape yesterday, gold had a predictable reaction: it rose. Since bottoming out a few months ago in the $1,600 range, it has since risen to over $1,900 as inflation fears have picked up. However, inflation is not the only thing driving the metal, as the Fed is playing a big role too. If the Fed stays dovish, and therefore the path of rates looks to stay low, then gold is in a great position—higher inflation with little rate risk from the Fed.

FINSUM: Gold is in a good spot. The Fed will only start hiking if inflation really jumps, which would push gold higher anyway. If inflation is more mild, then at least their won’t be rate pressure.

(New York)

The market was in a frenzy over the latest CPI report which had the highest rise in inflation…see the full story on our partner Magnifi’s site