Sustained strong economic growth is good for most stocks. It also is good for commodities, suggests fund expert Bob Carlson, editor of Retirement Watch.
The likelihood that inflation will remain elevated is good for a basket of inflation hedges: gold, real estate investment trusts (REITs), commodities and Treasury Inflation- Protected Securities (TIPS).
For now, it appears that the stimulus of 2020 created sustainable momentum in both growth and inflation. The momentum should continue unless disrupted by external factors such as central banks tightening more than expected, substantial tax increases, geopolitical conflicts, or adverse developments in the pandemic.
A new buy recommendation within our model portfolios is DWS RREEF Real Assets (AAASX). This fund has six share classes. Check with your broker or the fund for guidance on the best share class available to you.
This mutual fund is allocated among inflation-sensitive assets, including infrastructure stocks, commodities, gold, real estate stocks and TIPS. It owns both stocks and futures contracts.
The fund’s managers change the allocations to the different sectors based on their outlook for the economy and inflation and have a history of profitably adjusting the portfolio.
In addition, analysts specializing in each of the sectors select the individual securities to be purchased after the top managers decide on the sector allocations.
We might not capture all the returns of a big commodity rally with this fund, but we’ll have more diversification and benefit from the full basket of inflation hedges.
The fund returned 4.21% over three months, 18.04% so far in 2021 and 28.12% over 12 months. The 12-month distribution yield is 1.96%.