performance of deflationary assets vs. those which are inflationary since 1960.
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For most of the past decade, as technology companies increased our productivity and China exported deflation to the Western hemisphere,
inflationary pressures were suppressed. Hence, deflationary assets outperformed inflationary assets,
but
that is starting to change. Here is why:
Covid broke supply chains which increased the cost of materials (ask anyone who is doing a home renovation project how much the cost of wood, cement, or tiles has gone up). PC Richards is telling me it is going to take six months for my new stove & fridge to arrive. I ordered them in January, and they anticipate a late June delivery because the manufacturer cannot get the parts to build the products. The worst part is that I am expecting my third child in late June. Good times!
The Federal Reserve has been steadfast in keeping interest rates where they are, but as the economy continues to show signs of improvement, that could change. Benchmark Treasury yields are already ticking higher, which could be a boon to regional banks.
As for DPST, it seeks daily investment results equal to 300% of the daily performance of the S&P Regional Banks Select Industry Index. The fund invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments and securities of the index, ETFs that track the index, and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index.
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April 5, 2021
Rising bond yields weighed on technology stocks during the first quarter, but the group still has allure, and that includes small cap tech. Investors can get into that game with the
PSCT tracks the S&P SmallCap 600 Capped Information Technology Index. The ETF’s 77 holdings are “are principally engaged in the business of providing information technology-related products and services, including computer hardware and software, Internet, electronics and semiconductors and communication technologies,” according to Invesco.
Buoyant demand for chips is one reason to consider PSCT. A catalyst for PSCT in 2021 has been the strength of semiconductor stocks. The ETF allocates over half of its components to chip makers.
The SDOG ETF: Dividends, Value, and More
The
ALPS Sector Dividend Dogs ETF (SDOG) is a high dividend/value asset. With both styles soaring this year, the ETF boasts considerable momentum.
SDOG tries to reflect the performance of the S-Network Sector Dividend Dogs Index, which applies the “Dogs of the Dow Theory” on a sector-by-sector basis using the S&P 500 with a focus on high dividend exposure. SDOG’s equal-weight methodology is important because it reduces sector-level risk and dependence of some groups that are considered to be imperiled value ideas.
While much attention has been paid to the value resurgence in recent months, there are reasons to believe this value rebound could last for awhile. Additionally, SDOG can be paired with still-viable growth funds.