Let's say the FED starts rising rates to contain inflation at some point in the future, which would hurt stocks. If this happens I want to have some exposure to asset classes that would benefit from an increase in rates. What would be the best options for this? Bonds are the first thing that comes to mind, but I can see some drawbacks, specially if we're talking about an inflationary scenario:
- Even with a rise in rates, nominal yields will likely stay below inflation on treasury bonds, yielding negative real returns. I don't see the FED rising rates to 3%+ anytime in the near future.
- I would have to hold the bond until maturity, selling it would be bad if rates keep rising because price is inversely correlated to yield.
Are these assumptions correct? If so, are there better alternatives? TIPS does not sound like an alternative, its yield being bond yield minus inflation, so if bonds are below inflation so will TIPS (which is the current scenario, TIPS having negative yield). Gold price is inversely correlated to yields so it's a no-go. Crypto is high risk and I expect it would behave like so, with prices also falling, though it's hard to say. Are 1-2y bonds or CDs the best option here if I don't want to hold bonds for 10y?
Is there any asset class from which one could expect positive real returns in a scenario of rising rates?
Submitted October 24, 2021 at 10:53AM by auser24 https://ift.tt/3vH8Hnp
