Riding on soar prices and slow growth: Stagflation ETF is on the way
Investors may soon have an ETF to weather one of the worst possible outcomes for the U.S. economy: surging inflation coupled with stagnant economic growth.
What is Stagflation?![]()
Stagflation is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e. inflation). Stagflation can be alternatively defined as a period of inflation combined with a decline in the GDP.
Stagflation is characterized by slow economic growth and relatively high unemployment—or economic stagnation—which is at the same time accompanied by rising prices (i.e. inflation). Stagflation can be alternatively defined as a period of inflation combined with a decline in the GDP.
The Merk Stagflation ETF would be passively managed and track an index of so-called "stagflation-sensitive" asset classes, according to a SEC filing Wednesday. According to the filing, the fund would hold 55%-85% U.S. Treasury Inflation-Protected Securities (TIPs) and between 5%-15% real estate, gold and oil.
Fears about stagflation -- a toxic mix of rising costs, falling employment and slow growth -- have stalked markets for months as consumer prices rise at the fastest pace in four decades and the Fed moves closer to raising interest rates to cool the pace of growth.
Few expect that to be the likely outcome, especially with Fed Chair Jerome Powell saying he'll take a nimble approach to monetary policy and some price pressures expected to ease as supply chains roiled by the pandemic are repaired.
There's no question that stagflation concerns have eased in recent months, but I worry that they'll rise again in the coming months. Therefore, a stagflation ETF could gain a lot of interest. Higher inflation and lower profit margins will likely raise concerns about stagflation before long.”
--- said Matt Maley, the Miller Tabak + Co's chief market strategist.
--- said Matt Maley, the Miller Tabak + Co's chief market strategist.
Source: Bloomberg, ETF.com
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