A portfolio mix that combines both traditional and nontraditional asset classes – such as Treasury Inflation- Protected Securities (TIPS) and commodities – may be better positioned for a greater number of potential economic and inflationary scenarios.
What this chart shows
Stocks, bonds and cash, which form the core of many diversified portfolios, generally add value in most economic scenarios. In higher inflationary environments, assets such as emerging market securities, commodities and TIPS may perform better.
What it means for investors
Rounding out a core portfolio with nontraditional and real (inflation-hedging) assets can help investors participate in a broader range of economic environments while also managing volatility, which is particularly important in uncertain economic times.