Horizon Kinetics’ James Davolos is confident in his firm’s Inflation Beneficiaries ETF (INFL), even in the face of potential Federal Reserve rate cuts. According to Davolos, the ETF is well-positioned to thrive in the current inflationary environment, which he believes is entering a mature phase. He anticipates inflation rates between three and five percent, noting the Fed’s willingness to prioritize economic growth and employment over inflation containment.
Created in January 2021, the Inflation Beneficiaries ETF was designed to capitalize on rising inflation post-Covid-19. Davolos views the fund as a strategic asset for portfolio diversification, aiming to shield investors from the effects of prolonged inflation. By investing in companies with low asset and capital intensity, the ETF seeks to provide stability in an environment of sustained inflation.
The Inflation Beneficiaries ETF’s top holdings, which include Wheaton Precious Metals, PrairieSky Royalty, and Viper Energy, reflect its focus on companies resilient to inflation pressures. Despite underperforming the S&P 500 by five percent this year, Davolos believes that inflation-oriented ETFs offer long-term stability compared to the current dominance of tech stocks. He warns investors against overvaluing tech investments, emphasizing the importance of considering duration and inflation resistance in portfolio construction.
As of Friday’s close, the Inflation Beneficiaries ETF has gained 30% since its inception, showcasing its potential for growth in an inflationary environment. Davolos remains optimistic about the fund’s prospects, predicting a reversal of the current tech-driven rally as investors become more attuned to the realities of sustained inflation. He believes that, with inflation becoming a permanent fixture in the economic landscape, the Inflation Beneficiaries ETF is well-equipped to deliver consistent returns to investors seeking protection against inflation risks.
The Inflation Beneficiaries ETF represents a unique opportunity for investors to navigate the challenges of an inflationary market. With a focus on companies that thrive in inflationary environments and a strategic approach to portfolio diversification, the ETF offers a compelling option for those looking to safeguard their investments against the impact of rising inflation rates. Davolos’ confidence in the fund’s ability to deliver stable, long-term returns underscores the value of incorporating inflation-driven ETFs as a key component of a well-rounded investment strategy.