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5 Sector ETFs to Win from August Inflation Data

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The annual inflation rate in the United States eased for two months in a row to 8.3% in August of 2022, the lowest in four months, from 8.5% in July but above market forecasts of 8.1%. Meanwhile, core CPI, which eliminates volatile energy and food prices, increased 6.3% on a year, the most since March, and up markedly from 5.9% hit in both June and July.

Core CPI rose 0.3% over the prior month. Much of the continued rise in core inflation originated from the cost of shelter, which increased 0.7% sequentially, the maximum since January 1991. Shelter costs makes up a third of CPI.        

The energy index rose 23.8%, below 32.9% in July. Still, inflation data came in higher than forecast. Consumer prices were up 0.1% sequentially, following a flat reading in July and compared to forecasts of a 0.1% decline.

Against this backdrop, we suggest a few sector ETFs that can be worth investing at the time of rising inflation. Below we highlight those.

Real Estate

Weighted shelter makes up 32.77% of CPI, of which 7.8% is rent and 23.68% is private housing, per data from MacroMicro. Shelter costs rose 0.7% in August from 0.5% in July. Rising home prices also boosted the demand for real estate. Zacks Rank #2 (Buy) Vanguard Real Estate ETF (VNQ - Free Report) should thus win.

Medical Care Services

The medical care index rose 0.8% sequentially in August after an uptick of 0.4% in July. iShares U.S. Healthcare Providers ETF (IHF - Free Report) has a Zacks Rank #2. The underlying Dow Jones U.S. Select HealthCare Providers Index of the fund measures the performance of health care providers’ sub-sector of the U.S. equity market. It includes health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes plus rehabilitation & retirement centers.


The price inflation of new cars has been palpable. The index for new vehicles increased 0.8% in August after rising 0.6% 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.

The Zacks Rank #3 (Hold) First Trust SNetwork Future Vehicles & Technology ETF follows the S-Network Electric & Future Vehicle Ecosystem Index, which constituents are chosen by selecting the eligible Pure-Play companies in descending order of float-adjusted market capitalization until 100 constituents have been selected.


The index for utility gas service increased 3.5% in August after a decline of 3.6% in July. Electricity prices too added 1.5% in August after a 1.6% gain in July.

Utilities Select Sector SPDR ETF (XLU - Free Report) has a Zacks Rank #3. The underlying index seeks to provide an effective representation of the Utilities sector of the S&P 500 Index.

Transportation Services

Prices for transportation services increased 0.5% in August after a decline of 0.5% in July. SPDR S&P Transportation ETF (XTN - Free Report) has a Zacks Rank #2. The SPDR S&P Transportation ETF, before expenses, seeks to closely match the returns and characteristics of the S&P Transportation Select Industry Index.

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