We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
5 ETFs to Benefit as Monthly Inflation Drops to 2-Year Low
Read MoreHide Full Article
Inflation in the United States is cooling down gradually, underscoring that the worst of inflation has likely passed and the economy will be back on track sooner than expected. This is especially true as consumer prices unexpectedly fell for the first time in more than two-and-a half years in December.
The consumer price index dippped 0.1% in December after gaining 0.1% in November. It rose 6.5% year over year in December, down from a 7.1% year-over-year increase in November and a recent peak of 9.1% in June. The annual inflation growth was the smallest rise since October 2021. The data has put the Federal Reserve on track to again slow the pace of interest-rate hikes (read: Top ETF Stories Of 2022 & 2023 Outlook).
This has put focus on ETFs like SPDR Gold Trust ETF (GLD - Free Report) , First Trust Nasdaq Food & Beverage ETF (FTXG - Free Report) , iShares U.S. Home Construction ETF (ITB - Free Report) , Technology Select Sector SPDR Fund (XLK - Free Report) , and Invesco S&P 500 Pure Growth ETF (RPG - Free Report) . These funds are likely to benefit from easing inflation and a less aggressive Fed.
Behind the Inflation Numbers
Much of the relief came from declining energy prices and other goods, suggesting that inflation is now on a sustained downward trend. Prices at the pump plunged 9.4% in December after a 2% jump in November. Groceries saw the smallest increase since March 2021 on a monthly basis, up 0.2% compared to an increase of 0.5% in November.
Food prices increased 0.3% last month, down slightly from November's 0.5% increase while the cost of food at home rose 0.2%. Other items that saw monthly declines include dairy and related products (down 0.3%), with milk down 1.0%, flour and prepared flour mixes (down 1.0%), bacon and related products (down 2.9%), instant coffee (down 2.2%), ice cream and related products (down 1.1%) and fresh fruits (down 1.9%). However, shelter costs — which are the biggest services component and make up about a third of the overall CPI index — increased 0.8% last month, an acceleration from November.
The so-called core inflation, which strips out volatile components such as food and energy prices, rose 5.7% from the year-ago level after 6% advance in November. Inflation climbed 0.3% last month after rising 0.2% in November.
The cooling inflation has ignited hopes that the Fed might slow down the pace of its interest-rate increases. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion. A slowdown in the pace of rate hikes will provide some support to the yellow metal (read: Gold Set to Shine in 2023: Bet on These ETFs).
SPDR Gold Trust ETF tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is an ultra-popular gold ETF with AUM of $55.1 billion and a heavy volume of about 5 million shares a day. SPDR Gold Trust ETF charges 40 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
This ETF will continue to get a boost from rising food prices. First Trust Nasdaq Food & Beverage ETF offers exposure to U.S. companies within the food and beverage industry. It tracks the Nasdaq US Smart Food & Beverage Index, holding 30 securities in its basket, with each accounting for less than 8.2% share (read: 5 Top-Ranked ETF Wins Amid Worst Market in 2022).
First Trust Nasdaq Food & Beverage ETF has AUM of $955.9 million and charges 60 bps in annual fees. It sees an average daily volume of about 119,000 shares and has a Zacks ETF Rank #2 (Buy).
Homebuilder ETF will get a dual advantage from falling inflation and a higher shelter cost. Falling inflation will keep the mortgage rates low, making home ownership less expensive for first-time buyers, while higher shelter costs will provide homebuilders an edge to negotiate well.
iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With an AUM of $1.4 billion, it holds a basket of 48 stocks with a heavy concentration on the top two firms. iShares U.S. Home Construction ETF charges 39 bps of annual fees and trades in a heavy volume of around 2 million shares a day on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
The technology sector, which has been battered over the past year due to rising rates, will likely get some relief from the slower pace of rate hikes. As such, XLK seems a prudent choice. Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 76 securities in its basket and has key holdings in software, technology hardware, storage & peripherals, semiconductors & semiconductor equipment and IT services.
Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with AUM of $38.4 billion and an average daily volume of 6.3 million shares. The fund charges 10 bps in fees per year and has a Zacks ETF Rank #2 with a Medium risk outlook (read: 3 Reasons Why Tech ETFs May Rebound in 2023).
Growth investing will regain momentum, given the renewed appeal for riskier assets. Invesco S&P 500 Pure Growth ETF offers exposure to the companies that exhibit strong growth characteristics in the S&P 500 Index. It tracks the S&P 500 Pure Growth Index and holds 75 stocks in its basket, with none making up for less than 2.8% of assets. Energy dominates the portfolio with 30.1% of its assets, while healthcare and information technology round off the next two spots with double-digit exposure each.
Invesco S&P 500 Pure Growth ETF has amassed $2.2 billion in its asset base and trades in a good average volume of around 111,000 shares a day. The product charges 35 bps in fees a year from investors and has a Zacks ETF Rank #2 with a Medium risk outlook.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
5 ETFs to Benefit as Monthly Inflation Drops to 2-Year Low
Inflation in the United States is cooling down gradually, underscoring that the worst of inflation has likely passed and the economy will be back on track sooner than expected. This is especially true as consumer prices unexpectedly fell for the first time in more than two-and-a half years in December.
The consumer price index dippped 0.1% in December after gaining 0.1% in November. It rose 6.5% year over year in December, down from a 7.1% year-over-year increase in November and a recent peak of 9.1% in June. The annual inflation growth was the smallest rise since October 2021. The data has put the Federal Reserve on track to again slow the pace of interest-rate hikes (read: Top ETF Stories Of 2022 & 2023 Outlook).
This has put focus on ETFs like SPDR Gold Trust ETF (GLD - Free Report) , First Trust Nasdaq Food & Beverage ETF (FTXG - Free Report) , iShares U.S. Home Construction ETF (ITB - Free Report) , Technology Select Sector SPDR Fund (XLK - Free Report) , and Invesco S&P 500 Pure Growth ETF (RPG - Free Report) . These funds are likely to benefit from easing inflation and a less aggressive Fed.
Behind the Inflation Numbers
Much of the relief came from declining energy prices and other goods, suggesting that inflation is now on a sustained downward trend. Prices at the pump plunged 9.4% in December after a 2% jump in November. Groceries saw the smallest increase since March 2021 on a monthly basis, up 0.2% compared to an increase of 0.5% in November.
Food prices increased 0.3% last month, down slightly from November's 0.5% increase while the cost of food at home rose 0.2%. Other items that saw monthly declines include dairy and related products (down 0.3%), with milk down 1.0%, flour and prepared flour mixes (down 1.0%), bacon and related products (down 2.9%), instant coffee (down 2.2%), ice cream and related products (down 1.1%) and fresh fruits (down 1.9%). However, shelter costs — which are the biggest services component and make up about a third of the overall CPI index — increased 0.8% last month, an acceleration from November.
The so-called core inflation, which strips out volatile components such as food and energy prices, rose 5.7% from the year-ago level after 6% advance in November. Inflation climbed 0.3% last month after rising 0.2% in November.
ETFs in Focus
SPDR Gold Trust ETF (GLD - Free Report)
The cooling inflation has ignited hopes that the Fed might slow down the pace of its interest-rate increases. Gold is highly sensitive to rising U.S. interest rates, as these increase the opportunity cost of holding non-yielding bullion. A slowdown in the pace of rate hikes will provide some support to the yellow metal (read: Gold Set to Shine in 2023: Bet on These ETFs).
SPDR Gold Trust ETF tracks the price of gold bullion measured in U.S. dollars and kept in London under the custody of HSBC Bank USA. It is an ultra-popular gold ETF with AUM of $55.1 billion and a heavy volume of about 5 million shares a day. SPDR Gold Trust ETF charges 40 bps in fees per year from investors and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
First Trust Nasdaq Food & Beverage ETF (FTXG - Free Report)
This ETF will continue to get a boost from rising food prices. First Trust Nasdaq Food & Beverage ETF offers exposure to U.S. companies within the food and beverage industry. It tracks the Nasdaq US Smart Food & Beverage Index, holding 30 securities in its basket, with each accounting for less than 8.2% share (read: 5 Top-Ranked ETF Wins Amid Worst Market in 2022).
First Trust Nasdaq Food & Beverage ETF has AUM of $955.9 million and charges 60 bps in annual fees. It sees an average daily volume of about 119,000 shares and has a Zacks ETF Rank #2 (Buy).
iShares U.S. Home Construction ETF (ITB - Free Report)
Homebuilder ETF will get a dual advantage from falling inflation and a higher shelter cost. Falling inflation will keep the mortgage rates low, making home ownership less expensive for first-time buyers, while higher shelter costs will provide homebuilders an edge to negotiate well.
iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With an AUM of $1.4 billion, it holds a basket of 48 stocks with a heavy concentration on the top two firms. iShares U.S. Home Construction ETF charges 39 bps of annual fees and trades in a heavy volume of around 2 million shares a day on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Technology Select Sector SPDR Fund (XLK - Free Report)
The technology sector, which has been battered over the past year due to rising rates, will likely get some relief from the slower pace of rate hikes. As such, XLK seems a prudent choice. Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 76 securities in its basket and has key holdings in software, technology hardware, storage & peripherals, semiconductors & semiconductor equipment and IT services.
Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with AUM of $38.4 billion and an average daily volume of 6.3 million shares. The fund charges 10 bps in fees per year and has a Zacks ETF Rank #2 with a Medium risk outlook (read: 3 Reasons Why Tech ETFs May Rebound in 2023).
Invesco S&P 500 Pure Growth ETF (RPG - Free Report)
Growth investing will regain momentum, given the renewed appeal for riskier assets. Invesco S&P 500 Pure Growth ETF offers exposure to the companies that exhibit strong growth characteristics in the S&P 500 Index. It tracks the S&P 500 Pure Growth Index and holds 75 stocks in its basket, with none making up for less than 2.8% of assets. Energy dominates the portfolio with 30.1% of its assets, while healthcare and information technology round off the next two spots with double-digit exposure each.
Invesco S&P 500 Pure Growth ETF has amassed $2.2 billion in its asset base and trades in a good average volume of around 111,000 shares a day. The product charges 35 bps in fees a year from investors and has a Zacks ETF Rank #2 with a Medium risk outlook.