Investors don't have enough inflation hedges: Market expert
Investors don’t have enough inflation hedges in their portfolios: Market expert
Federated Hermes CIO Stephen Auth weighs in on inflation and gives his stock picks.
During an interview on "Mornings with Maria" Federated Hermes CIO Stephen Auth said that investors do not have enough inflation hedges in their portfolios and that there is a constrained global oil supply impacting the markets and oil prices.
STOCK FUTURES HIGHER ON HOPES DIPLOMACY WILL EASE RUSSIA-UKRAINE TENSIONS
STEPHEN AUTH: We expect oil- there has really been a constraint in supply from oil sources over the last five years. Energy companies are giving cash back to investors. They're not really reinvesting. The government doesn't want them to drill wells. And so there's a lot of pressure from all angles. As a result, we have very constrained global supply. Against the backdrop of the world reopening, particularly China, and everybody else that use a lot of energy. So, we just see this constrained supply and demand environment staying around longer than most people think. We think oil's heading for 120 somewhere in that range and may stabilize up there and little accidents like Ukraine don't help that. So that's another constraint on the Fed right here because oil is fueling inflation. But as you mentioned, you know, another self-correcting mechanism here is as oil prices go up and gasoline taxes. Well, it's a tax. In effect, gasoline prices go up. That'll crimp consumer demand elsewhere and may take some of the steam out of the economy. Not great news, but it is sort of self-correcting. And yeah, Schlumberger. We like the whole energy complex, frankly, but Schlumberger is a big beneficiary of higher oil. If you look the street, most of the street and mostly energy companies are still using 65 to $70 as the long-term price of oil, and that's the price they're using to schedule in their capital expenditures. So, you know, if prices do stay higher for longer than oil floats directly to the bottom line, these companies are the biggest beneficiaries of inflation that you can imagine right now. There's a reverse impact on margins. Their costs are kind of fixed and their revenue base goes up with inflation. So, you know, investors don't have enough inflation hedges right now in their portfolios. So.
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Economy can stand some near-term pressures: Market expert
Federated Hermes CIO Stephen Auth discusses energy prices, Federal reserve rate hikes and market volatility.
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