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A majority of investors believe inflation is transitory — but many are still positioning their portfolios for rising prices, an E*Trade survey reveals

trader nyseREUTERS/Brendan McDermid

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The majority of investors surveyed in a recent E*Trade study are aligned with the Federal Reserve's outlook that inflation is transitory. 

Out of the 898 investors who participated, 24% said they "strongly agree" with the statement that recent inflationary trends are transitory, while 54% said they "somewhat agree." Meanwhile, 17% said they "somewhat disagree" and only 5% said they "strongly disagree." 

However, inflation also jumped to the top portfolio risk among investors, with 35% selecting the factor as one of the two risks they see to their portfolio, 21 percentage points higher than the previous quarter's survey.

The Federal Reserve has insisted that inflationary pressures will only be transitory, though analysts have noted that the word is hard to define as it relates to how long prices will continue to rise. 

E*Trade surveyed investors from July 1-9. Since then, the US has seen two Consumer Price Index reports. The June report showed inflation rising higher than estimates, while the July report was in-line with economist expectations. Though both prints showed that year-over-year price growth is the strongest since 2008. 

Some investors believe that elevated inflation will force the Fed to change it's hand and raise interest rates sooner than expected. Investors will be looking for signals about the Fed's latest monetary policy outlook on Friday, where Fed chair Powell will speak at the Jackson Hole Symposium.

Against the current environment, 43% of investors surveyed are considering increasing exposure to stocks sensitive to higher rates in sectors like financials, energy, and materials. 20% are eyeing Treasury inflation-protection securities (TIPS) for their portfolio, while 21% are eyeing commodities, which typically gain as inflation picks up.

67% of investors surveyed expect the Fed to raise interest rates sometime in 2022. 

E*Trade's survey participants were self-directed active investors who manage at least $10,000 in an online brokerage account.  The survey has a margin of error of ±3.20 percent at the 95% confidence level. It was fielded and administered by Dynata.


 

 

 

 

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