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.
The CPI jumped again at its fastest annual pace in nearly 40 years in March. The annual inflation rate in the United States jumped to 8.5% in March 2022, the highest since December 1981 from 7.9% in February and above market forecasts of 8.4%. Rising commodities prices, higher demand and supply chain disruptions, and a low base effect from last year continued to raise prices.
Energy prices surged 32%, namely gasoline (48%) and fuel oil (70.1%) as Russia’s invasion of Ukraine pushed crude oil prices higher. Also, food prices jumped 8.8%, the most since May 1981. Inflation sped up for shelter (5% vs 4.7% in February) and new vehicles (12.5% vs 12.4%), per tradingeconomics.
Against this backdrop, we suggest a few sector ETFs that can be worth investing at the time of rising inflation. Below we highlight those.
Sectors to Gain
Energy
The energy sector tends to perform well in an inflationary environment. Revenues of energy stocks are dependent on energy prices, a key factor of inflation indices. Such firms surpassed inflation 71% of the time within a time span of 1973-2020 and delivered an annual real return of 9.0% per year on average.
The operating backdrop of the sector too is bullish. Oil prices have been rising since the beginning of 2022. The upside in crude oil prices was triggered by factors like easing Omicron variant concerns, supply shortages, and geopolitical tensions in energy-rich Eastern Europe and the Middle East. SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) could be good play here.
Food & Grocery Stocks
Food-at-home inflation is rising faster than food-away-from home inflation, indicating the hot groceries market. Food companies normally pass on cost increases of raw materials to consumers to maintain the profit margin. With consumer staples or food companies being a non-cyclical sector, the sheer necessities of staples can’t even deter consumers from buying those goods. Hence, the sector should hold up well in an inflationary environment.
Food-at-home inflation was 1.5% in March over 1.4% in February while food-away-from-home inflation was 0.3% in March over 0.4% in February. Invesco Dynamic Food & Beverage ETF (PBJ - Free Report) is a good pick here.
Real Estate
The ETFs on the U.S. real estate sector have been surging lately on still-low rates. Bets that the new COVID-19 variant Omicron may cause milder illness than previously feared eased fears of further lockdowns. Rising home prices also boosted the demand for real estate. Zacks Rank #2 (Buy) iShares U.S. Real Estate ETF (IYR - Free Report) should thus win.
Auto
The price inflation of new cars has been palpable. The index for new vehicles increased 0.2% in March after rising 0.3% the previous month. First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) can thus be played on the uptick in car price inflation.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
4 Sector ETFs to Win From a +8.5% Inflation
The CPI jumped again at its fastest annual pace in nearly 40 years in March. The annual inflation rate in the United States jumped to 8.5% in March 2022, the highest since December 1981 from 7.9% in February and above market forecasts of 8.4%. Rising commodities prices, higher demand and supply chain disruptions, and a low base effect from last year continued to raise prices.
Energy prices surged 32%, namely gasoline (48%) and fuel oil (70.1%) as Russia’s invasion of Ukraine pushed crude oil prices higher. Also, food prices jumped 8.8%, the most since May 1981. Inflation sped up for shelter (5% vs 4.7% in February) and new vehicles (12.5% vs 12.4%), per tradingeconomics.
Against this backdrop, we suggest a few sector ETFs that can be worth investing at the time of rising inflation. Below we highlight those.
Sectors to Gain
Energy
The energy sector tends to perform well in an inflationary environment. Revenues of energy stocks are dependent on energy prices, a key factor of inflation indices. Such firms surpassed inflation 71% of the time within a time span of 1973-2020 and delivered an annual real return of 9.0% per year on average.
The operating backdrop of the sector too is bullish. Oil prices have been rising since the beginning of 2022. The upside in crude oil prices was triggered by factors like easing Omicron variant concerns, supply shortages, and geopolitical tensions in energy-rich Eastern Europe and the Middle East. SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) could be good play here.
Food & Grocery Stocks
Food-at-home inflation is rising faster than food-away-from home inflation, indicating the hot groceries market. Food companies normally pass on cost increases of raw materials to consumers to maintain the profit margin. With consumer staples or food companies being a non-cyclical sector, the sheer necessities of staples can’t even deter consumers from buying those goods. Hence, the sector should hold up well in an inflationary environment.
Food-at-home inflation was 1.5% in March over 1.4% in February while food-away-from-home inflation was 0.3% in March over 0.4% in February. Invesco Dynamic Food & Beverage ETF (PBJ - Free Report) is a good pick here.
Real Estate
The ETFs on the U.S. real estate sector have been surging lately on still-low rates. Bets that the new COVID-19 variant Omicron may cause milder illness than previously feared eased fears of further lockdowns. Rising home prices also boosted the demand for real estate. Zacks Rank #2 (Buy) iShares U.S. Real Estate ETF (IYR - Free Report) should thus win.
Auto
The price inflation of new cars has been palpable. The index for new vehicles increased 0.2% in March after rising 0.3% the previous month. First Trust S-Network Future Vehicles & Technology ETF (CARZ - Free Report) can thus be played on the uptick in car price inflation.