Ever since the Middle East conflict erupted earlier this year, rising energy prices have continued to push the persisting risk of inflation further into the foreground. However, several market sectors are still growing at an attractive pace and many investors have taken the signal not to pivot to full defense — just yet. Instead, the wiser approach may be to consider strategies that could simultaneously counter inflation while building portfolio growth.
The Global Infrastructure Advantage
A recent insights post from the experts at BNY Investments broke down three specific strategies on how to navigate the current market landscape. The first strategy focused on global infrastructure and anyone already invested in infrastructure stocks probably won’t be surprised to see it on this “to do” list.
As the BNY team explained, global infrastructure companies are well-positioned due to their “pricing power and relatively stable income streams.” Furthermore, infrastructure companies are also poised to benefit from ongoing trends in artificial intelligence (AI).
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For those looking to gain access to the global infrastructure theme, the BNY Mellon Global Infrastructure Income ETF (BKGI ) is a compelling option. BKGI invests in both traditional and non-traditional infrastructure companies across the globe, providing well-balanced, diversified exposure to the sector.
Is it Time to Tilt Towards Value?
The second solution proposed in BNY’s post is a portfolio pivot from large-cap equity exposure towards value. Historically, large-cap value has tended to outpace large-cap growth during periods of inflation. Additionally, the post also noted that the sectors traditionally favored by value investors, like healthcare, are also well-positioned to benefit from AI adoption.
To amplify value exposure, the BNY Mellon Dynamic Value ETF (BKDV ) invests in companies with attractive fundamentals, strong business momentum, and valuations. Bolstered by the flexibility of active management, the strategy helps investors to navigate volatile shifting markets and capture opportunities that passive strategies might miss.
Why Short-Duration Bonds Make Sense
The third investment solution, according to the BNY team, is to opt for shorter-duration bonds. With inflation risk remaining persistent, longer-duration bonds are more exposed to rate shifts down the line. The post also noted that the current relationship between oil prices and bond returns has turned negative, reducing the potency of traditional bonds as a hedging instrument.
See more: Worried Inflation Is Back? Why Active Fixed Income Wins
Advisors and investors looking to safeguard their portfolio with short-duration bonds may want to consider the BNY Mellon Ultra Short Income ETF (BKUI ). BKUI is an actively managed ultra-short bond fund, operating with a relatively low expense ratio of 12 basis points.
BKGI, BKDV, and BKUI are examples of actively managed solutions available to investors looking to navigate inflation risk. Instead of running for the hills or pivoting to risk-off assets, using these strategies can help mitigate current market pressures and steadily grow a portfolio over the long term.
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