Shift to Thematic Trades as Bond-Based Portfolios Fail

The traditional approach to hedging against supply shocks and inflation is no longer effective. Historically, investors have turned to oil prices as a way to capitalize on supply disruptions, but this strategy has proven volatile. For example, in 2026, rising crude prices due to the US-Iran war and Russia-Ukraine conflict led to significant gains for opportunistic traders, with broad-based energy sector ETFs like XOP up around 40% this year.

However, any abrupt change in geopolitics could quickly reverse these gains. As a result, some investors are taking a longer-term view of natural resource supply-demand imbalances and opting for thematic stock and sector trades on themes from AI to agriculture, metals & mining, and electrification.

Tyler Rosenlicht, head of natural resource equities at Cohen & Steers, notes that the traditional 60-40 portfolio design, which consists of 60% stocks and 40% bonds, is no longer effective in a world where supply shocks are becoming more frequent. He advocates for investing in real assets like oil, gas, and agriculture to hedge against inflation.

Adam Patti, CEO of VistaShares, points out that the problem with oil and gas is not the direction but the volatility. Instead, he suggests focusing on the broader macroeconomic story, such as diesel prices, which have reached record levels and are driving industry growth and inflationary pressure on goods and services.

Patti's VistaShares Electrification Supercycle ETF (POW) has seen significant gains this year, up 32%, driven by the electrification trend. He believes that the energy needs of the world are accelerating, with natural gas demand rising faster and for longer than oil demand.