Investors looking to pad their portfolios with an inflation-hedging strategy may want to look at sugar. The commodity can not only serve as a portfolio diversifier, but also to stave off the effects of inflation in this higher-for-longer narrative.
Inflation continues to rear its ugly head and this time around, the data was evident in September’s wholesale prices. This continues to feed into the storyline that inflation is here to stay for some time and rate cuts may not come until 2024.
“A measure of wholesale prices rose more than expected in September, indicating simmering inflation pressures for the U.S. economy,” CNBC reported.
“The producer price index, which measures costs for finished goods that producers pay, increased 0.5% for the month, against the Dow Jones estimate for a 0.3% rise,” the report added further.
Other Forces at Play
The effects of inflation spilling over into other commodities is also at play when it comes to rising sugar prices. Oil, for example, has been on the move this year, providing an additional catalyst for higher sugar prices.
“The rising cost of crude oil is spreading to the wider global economy, pushing up prices for sugar, rubber and other essential commodities and contributing to persistent inflationary pressures,” Nikkei Asia reported.
To get exposure to rising sugar prices, an easy way is via the (CANE ) — it’s the only sugar ETF on the market. As mentioned, it’s accessible to investors who want a convenient way to get exposure to sugar whether it’s to hedge against inflation and/or to diversify a portfolio.
That inflation hedge component is especially crucial in the current macroeconomic environment. There’s no determining exactly when inflation’s extended stay will come to an end.
“Either way, investors will need to remain patient. Lowering inflation significantly from last year’s highs was one challenge, getting it down to the Fed’s 2% target level is another," said Mike Loewengart, head of model portfolio construction for Morgan Stanley’s Global Investment Office.
The fund seeks to have the daily changes in the NAV of the fund’s shares reflect the daily changes in the market for future delivery. It does this by measuring a weighted average of the closing settlement prices for three futures contracts for No. 11 Sugar. All three of these trade on the ICE Futures US. The fund seeks to achieve its investment objective by investing under normal market conditions in Benchmark Component Futures Contracts.
For more news, information, and analysis, visit the Commodities Channel.