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BlackRock Investment Head Says It's Time to Hedge Against Inflation

BlackRock’s Gargi Chaudhuri says she is 'looking forward to seeing more strength in some of the goods parts of the market.'

BlackRock’s Gargi Chaudhuri said that she expects Friday’s inflation reading to exceed Wall Street’s estimates and is advising investors to hedge against higher prices.

Chaudhuri, head of iShares Investment Strategy Americas, said Thursday in an interview on Bloomberg TV’s Surveillance that "we’re probably going to get something that’s a little bit stronger than what the market is pricing in.”

“I am looking forward to seeing more strength in some of the goods parts of the market, as well as services such as shelter inflation," she said.

Economists are expecting Friday's Consumer Price Index to show an increase of 6.8% for November, which would be the highest rate since Ronald Reagan was president in the early 1980s.

Chaudhuri told Bloomberg that she expects inflation to moderate later in 2022, while prices of goods and services will remain above pre-pandemic levels. 

She advised investors to look to assets that guard against the erosion of returns caused by inflation, such as “equities of those companies that are able to pass on higher prices.”

“Within the bond markets, our expectations are for yields to go higher,” Chaudhuri said. “Moving your allocations to inflation-linked bonds could make sense.”

Real assets also offer good inflation hedges, including infrastructure investments, real-estate investment trusts and a basket of diversified commodities, she said.

Separately, President Joe Biden said Thursday that CPI would not reflect a recent drop in some prices including energy costs, Reuters reported.

"Fortunately, in the weeks since the data for tomorrow's inflation report was collected, energy prices have dropped," Biden said in a statement, noting a recent fall in retail gasoline prices in some states.

"The information being released tomorrow on energy in November does not reflect today's reality, and it does not reflect the expected price decreases in the weeks and months ahead, such as in the auto market," he said.

Biden repeated that passing his "Build Back Better" social spending plan would help lower costs.