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Alternative Market Briefing

The hedge commodity can offer depends on the type of inflation

Monday, July 04, 2022

Harold de Boer
B. G., Opalesque Geneva:

Since early 2021, inflation has been firmly back on the agenda, writes Harold de Boer, Transtrend's managing director and head of R&D in a recent inhouse article. And many investors are turning their eyes toward commodities because they can offer inflation protection. However, he warns, investing in commodities actively is in many ways more appropriate than investing passively.

Transtrend, a Dutch systematic investment manager specialised in trend-based trading, has just celebrated the anniversary of its Diversified Trend Program (DTP). DTP was launched 30 years ago and has annualised between 8% and 11% since.

Rising commodity prices are an explanatory factor as well as an indicator for inflation to come

The hedge commodity can offer depends on the type of inflation, de Boer explains in the article. It could be currency-related inflation, such as in Zimbabwe in 2008 and in Turkey more recently. If this is the case, commodities aren't necessarily the best hedge and surely not the easiest one.

Zimbabwe and Turkey are extreme cases of demand-driven inflation (as opposed to supply-driven). This type of inflation was also seen somewhat in the past two years globally when governments and central banks injected hundreds of billions of currency into their economies. Global stock markets h......................

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