RLY: Own This If Inflation Makes A Comeback

Macrotips Trading profile picture
Macrotips Trading


  • RLY provides exposure to natural resource equities, commodities, and infrastructure assets that should do well in an inflationary environment.
  • In recent months, headline inflation has eased, prompting calls for a 'soft landing'.
  • However, I believe a case can be made that commodity-led inflation will resume in the coming months based on China's reopening and a European embargo on Russian oil.
  • Investors should hold the RLY ETF as a hedge against the rising inflation scenario.



A few months ago, I wrote a bullish article on the SPDR SSGA Multi-Asset Real Return ETF (NYSEARCA:RLY), suggesting investors own it while inflation expectations are rising. The RLY ETF gives investors a 1-stop exposure to commodities, natural

Headline CPI inflation has declined in recent months

Figure 1 - Headline CPI inflation declined due to energy prices ((BLS))

Terminal Fed Fund Rate expectations have shifted lower

Figure 2 - Terminal Fed Fund Rate expectations have shifted lower (Author created with data from CME)

Headline vs. Core CPI Inflation

Figure 3 - Headline vs. Core CPI Inflation (Author created with data from bls)

Wholesale gasoline prices

Figure 4 - Wholesale gasoline prices (tradingeconomics.com)

Gasoline Seasonality

Figure 5 - Gasoline seasonality (equityclock.com)

Iron ore has rebounded 60% since November

Figure 6 - Iron ore has rebounded 60% since November (tradingeconomics.com)

RLY asset allocation

Figure 7 - RLY asset allocation (ssga.com)

RLY vs. 5Yr Breakeven Rates

Figure 8 - RLY vs. 5Yr Breakeven rates (Author created with price chart from stockcharts.com and breakeven rates from St. Louis Fed)

This article was written by

Macrotips Trading profile picture
I spent 5 years as a co-founder and hedge fund CIO / manager. Before that, I was a hedge fund analyst/portfolio manager at a leading Canadian alternative asset manager. I write articles as part of my own due diligence on the stocks that I find interesting, for one reason or another.Follow me on twitter for my thoughts on macro trends.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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