The authors examine how investors can protect portfolios from renewed inflation without betting on its direction. Their 1972–2026 analysis favors commodities and trend following; a hypothetical robust portfolio raised expected return from 6.1% to 6.8% while reducing the 2022 inflation-shock loss from 15.2% to 8.9%.
Inflation Redux? Real Solutions for Real Returns
AQR
Pete Hecht
Research
25 Pages
Key Takeaways
Inflation diversification breaks: Across the 1972–2026 sample, stocks and bonds shared negative inflation sensitivity, while commodities and trend following provided positive exposure.
Robust mix improves: The hypothetical robust portfolio raises expected return from 6.1% to 6.8% and cuts the 2022 inflation-shock loss from 15.2% to 8.9%.
Commodity design matters: Hypothetical risk-balanced commodities returned 11.9% versus 3.6% for the Bloomberg Commodity Index, with Sharpe ratios of 0.57 versus 0.12.
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