Inflation May Not Be Tamed. How Commodities Can Protect Your Portfolio.

From Barron’s

It’s estimated that $250 billion in various strategies, including mutual funds and exchange-traded funds, are devoted to commodities, less than 0.5% of the $50-trillion-plus market value of the S&P 500.

But there are reasons to believe that commodities could perform better in the future, particularly if Donald Trump follows through on election promises regarding tariffs, which could spur higher prices.

“Commodities are an inflation hedge and a diversification tool,” says Kathy Kriskey, the commodities strategist at Invesco. “We could be entering an inflationary period, and commodities are the most efficient hedge against inflation.”

Kriskey doesn’t have to be right about inflation for commodities to be worth owning—that’s the point of a hedge. A 5% allocation, her recommended amount, could have helped in years like 2022, when the S&P 500 was down 19% and the Bloomberg Commodity Index rose 14%. Rather than a standard 60-40 mix of stocks and bonds, a 60-35-5 portfolio that includes commodities could be a good approach in the coming years.