A Double-Hedged Sword: Commodities & Inflation
One of the most common portfolio constructions is a blend of stocks and bonds. The stocks power growth during times of economic expansion and bonds act as a hedge, since bond prices tend to rise when the economy is in recession. If one goes down, the other goes up. Except for right now.
Since the start of 2022, both stocks and bonds are down. It’s the first time that’s happened since the late 1960s. The culprit? Our old friend, inflation. The Federal Reserve’s aggressive response to inflation has the market worried about a recession. Investors have responded by selling, driving stock prices down. But higher interest rates decrease the value of bonds as well. Suddenly, a lot of portfolios are without a hedge. So how do you protect your investments in this unique, uncertain time?
One answer is commodities: everything from oil, wheat, copper and cattle. They’re one of the most powerful hedges against inflation–but it’s also a different kind of asset class, subject to all sorts of unique risks. To operate with confidence, you need to learn the language of commodities. Fortunately, we know someone who’s fluent: Callum Bruce, Commodities Specialist at Goldman Sachs.
With Callum’s help, we’ll delve into the power, precariousness and possibility of the commodity; everything from what they are and how they work, to why Callum thinks they’re undervalued. Plus, the commodity constraints coming down the road and the surprisingly strong link between certain commodities and the value of the dollar.
So come with us as we explore the cutting hedge, where the oddities are good and the goods are commodities.
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Meet the Host
Patrick Pacheco, Executive Vice President, Trust Executive, has more than 25 years’ experience in wealth management, in addition to the designing and implementation of tax and related planning strategies.
Pacheco’s background includes years of legal practice and multiple degrees, including an LLM* Taxation from University of Houston, a JD from Southern Methodist University, and both an MBA and BS in Economics from University of Texas at Arlington.
He is also board certified in Estate Planning and Probate law by the Texas Board of Legal Specialization.
Meet the Speakers
Callum Bruce is a Senior Energy Strategist within the Global Commodities Macro Research group. He joined their London offices in 2016, before transferring to Goldman Sachs’ New York headquarters in 2018. He graduated from the University of Oxford with an MPhil in Economics in 2016, prior to that, obtaining a BSc in Economics from the London School of Economics in 2014.
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