Note: This article is courtesy of Iris.xyz
Written by: Abdur Nimeri, Ph.D
REAL ASSETS VOLATILITY: ASSET CLASS VS. THE PORTFOLIO
The global economy continues to exhibit subdued growth and below target inflation. Central bank policies have begun to diverge as financial markets react with ramped-up volatility and gyrating risk asset prices. The behavior of commodities has been especially noteworthy.
The wild ride has caused many investors to reconsider their commodity and real asset holdings. However, volatility should not drive the decision to own or not own these investments. Market sell-offs certainly spark investor anxieties but they also raise awareness of the risk management benefits of owning real assets. A careful pairing of these assets can help improve a portfolio’s performance and risk profile over a strategic investment horizon. Let’s look at how a blend of real asset equities that includes infrastructure, real estate and natural resources can help investors navigate periods of market volatility.
MONETARY POLICY AND REAL ASSETS: HINDSIGHT IS 20/20
The U.S. Federal Reserve’s decision on December 16, 2015 to raise its policy rate is an important shift that reflects high confidence in the strength and durability of the U.S. economy’s expansion. In comparison, most other developed countries’ economies are growing more slowly and their central banks remain in easing mode, as do the larger emerging market economies of China and India. Select others, such as Russia and Brazil, have been raising policy rates. Notwithstanding these outliers, monetary accommodation continues to be an important consideration for global investors. Because monetary policy plays a pivotal role in the pricing dynamics of real assets, the divergent paths now being pursued by central banks will complicate the growth trends of real-asset-based economies.
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