The first interest rate increase by the Federal Reserve since 2018 happened this week, with the central bank planning six more of 25 basis points or one-quarter of a percent each this year.
The lending market is already ahead of the Fed. The average fixed-rate 30-year mortgage topped 4% for the first time since 2019 in the latest reporting week. It’s happening in a hot housing market. The median listing price for homes hit an all-time high of $392,000 in February and the inventory of homes for sale fell to a record low in January.
By raising rates the Federal Reserve intends to make borrowing more expensive. That’s supposed to dampen demand for goods and services and slow price increases, i.e., inflation down. With inflation running close to an 8% annual rate, a 40-year high, it remains to be seen how effective the Fed’s incremental approach will be.
This week’s guest, a noted investment strategist known for his macro analysis and thematic investing, expects long-term inflation to be higher than it’s been in the past decade and believes most portfolios are not positioned for this new reality. In fact, he says the vast majority of investors, institutional and individual, are holding the winners of yesteryear instead of the winners of future years. He has recommendations to bring us up to speed! He is Richard Bernstein, Chief Executive and Chief Investment Officer of Richard Bernstein Advisors; he says most portfolios are not positioned for a new era of higher inflation.
WEALTHTRACK Episode #1838 broadcast on March 18, 2022
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- CEO & Chief Investment Officer,
- Richard Bernstein Advisors
OWN AN ENERGY ETF
TOP MORNINGSTAR ENERGY ETFs – Both have low fees & dividend yields above 3 percent
- ENERGY SELECT SPDR ETF, SYMBOL XLE, RATED 5-STAR SILVER
- one of largest & oldest energy ETFs
- Invests in companies in S&P 500 energy sector
- 21 of the oil, gas & energy equipment giants including Exxon Mobil, Chevron, EOG Resources, Conoco Phillips & Schlumberger
- VANGUARD ENERGY ETF, SYMBOL VDE, RATED 4-STAR GOLD
- Based on a broader energy index
- Includes over 100 large, mid & small cap energy companies
- Still dominated by major energy companies
TOP VALUE AND GROWTH SECTOR
Buy traditional energy companies’ ETFs
- Highest dividend yield and long term projected growth rate of S&P 500 sectors
CLEAR EYED INVESTING
Rich Bernstein explains how he stays focused on investing when the evil deeds of Russia’s Vladimir Putin and other bad actors dominate the headlines.