Natural Resources Equities: Preparing for Reflation and a Dollar Decline

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These are unreal times. There is substantial risk of reflation and significant dollar devaluation due to recent and anticipated additional fiscal and monetary stimulus. Natural resources equities represent ownership in longstanding, successful businesses that produce real assets that are essential to our life.

This article explores key reasons investors might consider natural resources equities as a vehicle to protect their portfolios and as a core portfolio holding for the long run:

  1. Gargantuan fiscal and monetary stimulus, and eerie historical parallels present significant risk of inflation and dollar debasement in the long run.
  2. Commodities and natural resources equities are out of favor and unloved.
  3. Recent returns suggest the opportunity for positive mean reversion.
  4. Valuations are depressed.
  5. They protect against accelerating inflation.
  6. They benefit from dollar declines.
  7. They have relatively low correlation with other equities, providing portfolio diversification benefits.
  8. Commodity (natural resources) equities are a more effective vehicle than futures.

Read the full article at SeekingAlpha.