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It’s Time to Hedge Against U.S. Inflation, BlackRock’s Chaudhuri Says

(Bloomberg) — BlackRock’s Gargi Chaudhuri expects Friday’s inflation reading to exceed Wall Street’s estimates, while advising investors to hedge against higher prices.

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“We’re probably going to get something that’s a little bit stronger than what the market is pricing in,” the firm’s head of iShares Americas investment strategy said in an interview on Bloomberg TV’s Surveillance on Thursday. “I am looking forward to seeing more strength in some of the goods parts of the market, as well as services such as shelter inflation.”

Read: Inflation Near 40-Year High Shocks Americans, Spooks Washington

Inflation is running at the highest levels in decades, and government data due Friday is expected to show an increase of 6.8% for November, based on economists’ forecasts. That would be the highest rate since Ronald Reagan was president in the early 1980s — and in the lifetimes of many Americans.

Chaudhuri said she expects inflation to moderate later in 2022, while prices of goods and services will remain above pre-pandemic levels. To protect themselves, investors should look to assets that guard against the erosion of returns caused by inflation, such as “equities of those companies that are able to pass on higher prices.”

“Within the bond markets, our expectations are for yields to go higher,” Chaudhuri said. “Moving your allocations to inflation-linked bonds could make sense.”

Real assets also offer good inflation hedges, including infrastructure investments, real-estate investment trusts and a basket of diversified commodities, she said.

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