The war in Iran reignited inflationary pressures and threw a wrench in the Federal Reserve’s plans to lower interest rates this year. Sure, anything is possible, but Fed funds futures imply long odds of a July rate cute. This indicates that the central bank is still cautious about inflation.
On the other hand, talk of a peace deal between the U.S. and Iran is prompting downside in the oil market. However, those are fragile situations, indicating investors can still benefit from inflation protection. The WisdomTree Inflation Plus Fund (WTIP ) answers that call.
WTIP, which turned a year old last month, is potentially appealing to advisors and income investors on multiple fronts. First, its inflation-fighting approach is unique. The ETF combines exposure to both commodities and Treasury Inflation Protection Securities (TIPS). Second, WTIP delivers the goods on the income front as highlighted by a tempting 30-day SEC yield of 10.3%.
WTIP Is Relevant Today
It’s possible inflation eases. Still, that’s not guaranteed and speculation to that effect doesn’t diminish the allure of WTIP. In fact, the ETF’s near-term relevance is arguably rooted in the benefits of preparedness.
“Significant uncertainty remains regarding the Strait of Hormuz, and the price of oil and inflation should remain a priority,” notes Morningstar’s Joe Bullard. “Given that oil is a major input in most corporate industries, its higher price puts significant upward pressure on costs throughout the economy, and price increases often come with a lag.”
Gold prices retreated in material fashion. Investors are hoping for more of the same with oil, but it’s worth noting that bullion is about to enter what historically has been a seasonally strong period. That could provide a boost to WTIP’s commodities basket, which is an arguably underappreciate facet with this ETF owing to commodities’ reputation as one of the best inflation buffers over the long-term.
“Commodities funds are perhaps the simplest protection against inflation. During periods of high inflation, these funds generally profit significantly,” adds Bullard.
Bottom line: As is the case in life, failure to prepare is preparing to fail in investing. WTIP offers preparation in convenient, actively managed form.
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