The gold market continues to struggle to attract new bullish momentum as some investors worry the Federal Reserve will be more aggressive than first anticipated when it comes to monetary policy tightening in 2022. However, WisdomTree’s head of equity strategy, Jeff Weniger, said in a recent statement that as rising inflation remains a threat, investors should look to owning more real assets and fewer bonds in 2022.
“High inflation will force Fed to raise interest rates sooner than expected”
Cryptocoin. com, the gold market continues to feel the effects of last week’s sharp sell-off after President Joe Biden nominated Jerome Powell to head the Federal Reserve for four more years. While the nomination is open, some investors expect Jerome Powell to be much more hawkish in the future. Jeff Weniger notes that it doesn’t matter who heads the Federal Reserve, as rate hikes still can’t keep up with inflation:
As to whether the Fed is behind the curve, the answer is absolutely positive, 100% yes.
The famous strategist says travel data shows that US air traffic is already back to 2019 levels:
There is a lot of pent-up demand for services and this will be the next inflation threat as the supply chain recovers. Inflation will still remain an issue in 2022, but the pressures will be slightly different.
Inflation is expected to drop from 6.2% in October, a 31-year high, while Jeff Weniger says it still remains above 4%. The strategist adds that higher inflation will likely force the Federal Reserve to raise interest rates sooner than expected. However, it also reminds that investors should pay attention to the big picture.
Strategist advises investors to add commodities such as gold, silver and oil to their portfolios
Currently, markets expect the Federal Reserve to raise interest rates by June 2022 and are pricing in a total of three rate hikes. Jeff Weniger makes the following assessment:
Let’s say one way or another, there will be four rate hikes next year. This does not prevent commodities from rallying. If your money is worth something like 1% and inflation is hovering at 3% or 4%, it’s still a very coherent monetary policy.
In this environment, Jeff Weniger says he advises investors to take the traditional 60/40 portfolio model and adjust it to add commodities like gold, silver and oil. He also states that investors should look at the 60/30/10 portfolio model.
The strategist adds that the asset is still unattractive, even as the yield on the two-year bonds rises 200% from current levels to 1.5%:
Not attractive for investors or in terms of returns. The only attraction here is the diversification effect. But you can get the same thing in commodities. If inflation continues to rise, commodities will be the soothing balm for your portfolio.
While stagflation, a climate of rising inflation and low economic growth, is on the radar for 2022, Jeff Weniger thinks it’s not a great scenario. He notes that US consumers are spending stocked cash and the unemployment rate continues to fall, and says these factors do not point to slower growth in 2022. When it comes to stock opportunities, the strategist explains that he likes value stocks and will stay away from mag-cap growing stocks.
