3 Economic Challenges and What Funds Can Help

In the meantime, here are three broader market challenges facing advisors today along with ETFs that can help solve the problem.

With many experts and analysts pointing to a likely recession, portfolios that haven’t been prepared are likely to end up in a rough position. Amazon’s founder Jeff Bezos said to Markets Insider, “Things are slowing down, you’re seeing layoffs in many, many sectors of the economy. The probabilities say if we’re not in a recession right now, we’re likely to be in one very soon.”

Bezos advised small business owners to hold back on making big investments or purchases and instead keep a healthy amount of cash on hand. But even in a recession, investors have options beyond parking in cash.

Healthcare is one area where performance is less likely to be tethered to a recession. If people get sick, they need healthcare, which makes the Health Care Select Sector SPDR Fund (XLV A) an interesting fund. Akin to healthcare, food is a necessity, which gives commodities funds such as the Teucrium Wheat Fund (WEAT C) and the Teucrium Corn Fund (CORN B) interesting possible plays.

The ongoing Russian invasion of Ukraine continues to shake up the world, but one of its most viscerally felt impacts is in the realm of energy. The war has revealed the extent to which Russia had embedded itself in global energy supply chains, and with sanctions and geopolitical tensions at a high, an already brutal winter is likely to get even more challenging.

Energy has been one of the lone bright spots in a tumultuous 2023 market, and investors could get access to the sector in several ways, but one unique avenue to explore is the midstream through funds such as the Alerian MLP ETF (AMLP A-).

Another thing to keep in mind though is the long-term play toward clean energy. As COP27 looks to chart a path through climate change and the Democratic party shirked off a red wave during the midterms, clean energy could be on the cusp of getting massive investments. Investors can access the green energy revolution with funds like iShares Global Clean Energy ETF (ICLN A+) and the Invesco Solar ETF (TAN C+).

Though the latest CPI print lead to a collective sigh of relief, if you were to somehow get yourself in a time machine and travel back even just a couple of years, people would look at you funny if you told them that, one day, hearing inflation was over 7% would bring them relief.

Inflation is a complex problem that is likely not going to be solved anytime soon. Fortunately, there are a number of potential plays that can help investors stay ahead of inflation. Commodities are a smart play in times of inflation so something like the Invesco DB Agricultural Fund (DBA A) might be a reliable inflation pick. State Street’s SPDR SSGA Multi-Asset Real Return ETF (RLY A+) is specifically designed to combat inflation, and the surprise superstar performer of 2022, managed futures, also might be worth exploring through a fund like the iMGP DBi Managed Futures Strategy ETF (DBMF B+).

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