Invesco Head of Innovation and Commercialization John Feyerer sat down with VettaFi editor-in-chief Lara Crigger to talk about how investors can manage their risk for their portfolios, given the enormous challenges facing the market in 2022.
“When you look at what we’ve seen thus far this year, it’s been elevated equity volatile that we think a couple of key inputs are going to continue to point to that for the foreseeable future,” Feyerer said, noting that the current economic backdrop includes rising wages, fed tightening, slowing economic growth, and geopolitical tensions from the Russian attack of Ukraine.
In the last five to seven years, equity volatility has been historically low, which Feyerer says will only make the elevated equity volatility feel even sharper. “Investors, even in times as uncertain as these, it’s important to be thinking of strategies that can help them remain invested,” Feyerer notes.
Inflation Is Here to Stay
It was long ago that inflation was being thought of as transitory, but it is becoming increasingly clear that inflation is here to stay and that investors will have to grapple with it for the foreseeable future. Feyerer sees commodities and real assets as strategies that perform well in times of inflation. “So often gold is pointed to as a potential solution, its interesting, the data shows that when inflation shocks, gold tends to do well, but when you see more of a protracted span of time in which inflation is a reality for investors, a broad basket of commodities can be a good hedge against inflation,” Feyerer said, point to the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC) which is an easy way for investors to get a broad spread of commodities into their portfolio.
Concentration Risks
Feyerer also like the Invesco S&P 500 Equal Weight ETF (RSP) as a possible solution to concentration risk. “Concentration has become more and more of a reality. If we go back just five years ago, the top ten names in the S&P 500 were roughly more than 20% of the index. Today they are more than thirty.” RSP takes the concentration out of the S&P 500 by using its allocation to invest equally in all 500 names.
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