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The Federal Reserve hike benchmark interest rates by another 75 bps and indicated it will keep hiking well above the current level to tame sky-high inflation. Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023, per a CNBC article. That implies a quarter-point rate hike next year but no decreases.
The median Federal Funds rates are now projected to be 4.4% for 2022 (from 3.4% projected in June). For 2023, the same is projected to be 4.6% (from 3.8% in June) and for 2024, the same is projected to be 3.9% (from 3.4% in 2024).
The Fed also hiked its inflation forecast for the year. The central bank now expects median inflation rate to jump to 5.4% this year, higher than its previous forecast of 5.2%. PCE inflation expectation has gone up to 2.8% for 2023 from 2.6% projected in December. The Fed downgraded its forecast for 2022 median real GDP growth from 1.7% in June to 0.2% for 2022. It lowered the growth rate expectations same for 2023 and 2024 to 1.2% and 1.7% from 1.7% and 1.9%, respectively.
With the possibility of a hawkish Fed in 2022 and 2023, short-term government bond yields rose. Two-year U.S. treasury yield jumped to4.02% on Sep 21 from 3.96% recorded on the day earlier. Benchmark bond yields fell to 3.51% from 3.57% recorded on Sep 20. Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) gained 0.98% on Sep 21. Key U.S. equity indexes dropped post Fed meeting.
Against this backdrop, below we highlight a few ETFs that rose yesterday. These ETFs mainly came from the areas like commodities, alternative ETFs and inverse ETFs.
ETFs in Focus
iPath Lead Subindex TR Sm Index ETN – Up 6.80%
The underlying Bloomberg Lead Subindex Total Return reflects the returns that are potentially available through an unleveraged investment in the futures contracts on lead. The fund charges 70 bps in fees.
Simplify Tail Risk Strategy ETF – Up 5.5%
This ETF is active and does not track a benchmark. The Simplify Tail Risk Strategy ETF seeks to provide investors with a standalone solution for hedging diversified portfolios against severe equity market selloffs. The fund charges 50 bps in fees and yields 7.80% annually.
iPatha.B Cotton Subindex TR ETN – Up 3.7%
The underlying Bloomberg Cotton Subindex Total Return reflects the returns that are potentially available through an unleveraged investment in the futures contracts on cotton. The fund charges 45 bps in fees.
Tuttle Capital Short Innovation ETF (SARK - Free Report) – Up 2.7%
This ETF is active and does not track a benchmark. The AXS Short Innovation Daily ETF seeks the daily inverse investment results and is intended to be used as a short-term trading vehicle. The fund charges 75 bps in fees.
Extended Dur Treasury Index ETF Vanguard (EDV - Free Report) – Up 2.4%
The underlying Bloomberg U.S. Treasury STRIPS 20—30 Year Equal Par Bond Index includes zero-coupon U.S. Treasury securities, which are backed by the full faith and credit of the U.S. government, with maturities ranging from 20 to 30 years. The fund charges 6 bps in fees and yields 3.01% annually.
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ETFs That Won After Fed Rate Hike
The Federal Reserve hike benchmark interest rates by another 75 bps and indicated it will keep hiking well above the current level to tame sky-high inflation. Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023, per a CNBC article. That implies a quarter-point rate hike next year but no decreases.
The median Federal Funds rates are now projected to be 4.4% for 2022 (from 3.4% projected in June). For 2023, the same is projected to be 4.6% (from 3.8% in June) and for 2024, the same is projected to be 3.9% (from 3.4% in 2024).
The Fed also hiked its inflation forecast for the year. The central bank now expects median inflation rate to jump to 5.4% this year, higher than its previous forecast of 5.2%. PCE inflation expectation has gone up to 2.8% for 2023 from 2.6% projected in December. The Fed downgraded its forecast for 2022 median real GDP growth from 1.7% in June to 0.2% for 2022. It lowered the growth rate expectations same for 2023 and 2024 to 1.2% and 1.7% from 1.7% and 1.9%, respectively.
With the possibility of a hawkish Fed in 2022 and 2023, short-term government bond yields rose. Two-year U.S. treasury yield jumped to4.02% on Sep 21 from 3.96% recorded on the day earlier. Benchmark bond yields fell to 3.51% from 3.57% recorded on Sep 20. Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) gained 0.98% on Sep 21. Key U.S. equity indexes dropped post Fed meeting.
Against this backdrop, below we highlight a few ETFs that rose yesterday. These ETFs mainly came from the areas like commodities, alternative ETFs and inverse ETFs.
ETFs in Focus
iPath Lead Subindex TR Sm Index ETN – Up 6.80%
The underlying Bloomberg Lead Subindex Total Return reflects the returns that are potentially available through an unleveraged investment in the futures contracts on lead. The fund charges 70 bps in fees.
Simplify Tail Risk Strategy ETF – Up 5.5%
This ETF is active and does not track a benchmark. The Simplify Tail Risk Strategy ETF seeks to provide investors with a standalone solution for hedging diversified portfolios against severe equity market selloffs. The fund charges 50 bps in fees and yields 7.80% annually.
iPatha.B Cotton Subindex TR ETN – Up 3.7%
The underlying Bloomberg Cotton Subindex Total Return reflects the returns that are potentially available through an unleveraged investment in the futures contracts on cotton. The fund charges 45 bps in fees.
Tuttle Capital Short Innovation ETF (SARK - Free Report) – Up 2.7%
This ETF is active and does not track a benchmark. The AXS Short Innovation Daily ETF seeks the daily inverse investment results and is intended to be used as a short-term trading vehicle. The fund charges 75 bps in fees.
Extended Dur Treasury Index ETF Vanguard (EDV - Free Report) – Up 2.4%
The underlying Bloomberg U.S. Treasury STRIPS 20—30 Year Equal Par Bond Index includes zero-coupon U.S. Treasury securities, which are backed by the full faith and credit of the U.S. government, with maturities ranging from 20 to 30 years. The fund charges 6 bps in fees and yields 3.01% annually.