Horizon Kinetics’ James Davolos, portfolio manager of the Inflation Beneficiaries ETF (INFL), remains unwavering in his belief that the ETF is strategically positioned to thrive in the current market. Despite potential rate cuts by the Federal Reserve, Davolos is confident that the ETF is well-equipped to navigate the ever-changing economic landscape.

The Impending Phase of Inflation

Davolos predicts a future where inflation will hover between three and five percent, with the Federal Reserve indicating a willingness to prioritize economic growth and employment over inflation levels. This foresight has led Horizon Kinetics to create the Inflation Beneficiaries ETF in January 2021, precisely when inflation began to surge post-Covid-19 lockdowns. The ETF is designed to provide investors with a diversified portfolio that can withstand and even thrive in a high inflation environment.

The Inflation Beneficiaries ETF focuses on investing in companies categorized as “asset light” and “capital light,” with top holdings including Wheaton Precious Metals, PrairieSky Royalty, and Viper Energy. Although the ETF has underperformed the S&P 500 this year, Davolos believes that the stability and long-term gains from inflation-oriented ETFs surpass the short-term fluctuations of the current tech-heavy market.

A Different Perspective on Market Realities

Davolos criticizes the prevailing trend of investing heavily in tech companies without considering the prolonged impact of inflation on these sectors. He anticipates a reversal in this trend as investors become more aware of the enduring effects of inflation on different industries. Davolos highlights the importance of adapting to the new reality of a high inflation environment and the significance of strategically positioning portfolios to capitalize on such conditions.

Despite facing challenges in the current market landscape, the Inflation Beneficiaries ETF has shown promise, with a 30% increase in value since its inception. This growth serves as a testament to the ETF’s resilience and strategic positioning in a volatile market characterized by uncertainties around inflation and economic policies.

The Inflation Beneficiaries ETF offers investors a unique opportunity to navigate the complexities of an inflationary environment. By focusing on strategic investments and long-term stability, the ETF stands as a beacon of resilience in the ever-evolving financial markets.


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