The “debasement trade” has been a persistent investment theme this year as the market translates trade disputes, fiscal deficits, rate policy, and geopolitical tension into a negative outlook for the fiat world, and more specifically, the U.S. dollar.
If we measure the trajectory of the dollar by the performance of the Invesco DB US Dollar Index Bullish Fund (UUP), we see the greenback has been under pressure this year. It has dropped more than 5% year-to-date.
“The dollar has lost 53% of its purchasing power in the past 30 years,” said John Davi, CEO and CIO of Astoria Portfolio Advisors. ”The post-Great Financial Crisis [era]was dominated by deflation, low interest rates, and technology-driven deflation, which dominated market narratives. However, Covid changed it, and we are now living in a structurally higher interest rate and inflation world.”
Due to ongoing government fiscal intervention globally, massive central bank balance sheets, supply-side inflation (driven mostly by nearshoring and energy transitions), and geopolitical tension, the debasement trade is today the “single biggest risk factor” in markets, Davi said.
He is not alone. The market has run with this thematic opportunity this year, and to good results. We’ve seen strong performance among assets that benefit from this push to de-dollarize and this effort to hedge for inflation. My colleague Jane Edmondson recently wrote a piece about this theme recently. It highlighted key outperformers such as precious and critical metals ETFs as well as cryptocurrency funds.
When we look at broader multi-asset portfolios that tap into real assets, including digital assets, as well as inflation fighters like income securities and real return strategies, we find that they have delivered strong results to the debasement-trade crowd.
The Astoria Real Assets ETF (PPI) is an example. The actively managed fund run by Davi and his team captures this thematic opportunity through a multi-asset portfolio full of real assets, and so much more. Among the fund’s top holdings are gold and bitcoin, but also energy and infrastructure stocks.
PPI Top Holdings (as of Nov. 10)
Source: Astoria Portfolio Advisors
