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Are portfolios prepared for higher inflation?

Positioning for Higher Inflation will be the Portfolio Construction Topic in 2022

  • The number one question coming from advisors is, "how should I prepare my portfolios for higher inflation?" Astoria Portfolio Advisors has had an out of consensus view that inflation would be higher than most were expecting. We began running inflation linked strategies in mid-2020.

  • As a refresher, cyclically oriented sectors such as energy, materials, industrials, and financials have historically shown higher sensitivity to rising inflation. Indeed, energy stocks were the best performing sector in the US last year (see chart below).

Exhibit 1

2001 Return by Sector

Source: FactSet. Data as of December 31, 2021.

  • Keep in mind that cyclicals are still trading at a discount to the market. For instance, the S&P 500 Energy sector trades at 12 PE ratio based on 2022 estimates. Hence, in Astoria’s opinion, inflation-linked assets still offer an attractive margin of safety.

Click here to view Astoria's report


John Davi

Please note that Astoria Portfolio Advisors serves as a subadvisor to the AXS Astoria Inflation Sensitive ETF. The information contained does not imply a recommendation for PPI. Readers should consult their financial advisor to determine if PPI is a suitable investment for their portfolio. For more information on PPI, please click here.

Astoria Portfolio Advisors Disclosure: As of the time this article was written, Astoria held positions in PPI, XLE, SPY, QQQ, KBWB, VTIP, STIP, and AAPL on behalf of its clients. Past performance is not indicative of future performance. Any third-party websites provided on are strictly for informational purposes and for convenience. These third-party websites are publicly available and do not belong to Astoria Portfolio Advisors LLC. We do not administer the content or control it. We cannot be held liable for the accuracy, time-sensitive nature, or viability of any information shown on these sites. The material in these links is not intended to be relied upon as a forecast or investment advice by Astoria Portfolio Advisors LLC and does not constitute a recommendation, offer, or solicitation for any security or investment strategy. The appearance of such third-party material on our website does not imply our endorsement of the third-party website. We are not responsible for your use of the linked site or its content. Once you leave Astoria Portfolio Advisors LLC's website, you will be subject to the terms of use and privacy policies of the third-party website. Refer here for more details.


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