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5 Sector ETFs to Win from September Inflation Data
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The annual U.S. inflation rate eased for three months in a row to 8.2% in September of 2022, the lowest reading in seven months, compared to 8.3% in August but above market forecasts of 8.1%. Meanwhile, core CPI, which eliminates volatile energy and food prices, increased 6.6% on a year. Core CPI rose 0.6% over the prior month.
Much of the continued rise in core inflation originated from the cost of shelter. Shelter costs makes up a third of CPI. The energy index rose 19.8%, a smaller increase than the 23.8% increase for the period ending August. The food index increased 11.2% over the last year.
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 September, same as August. Year over year, prices are up 6.6%. 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 1% sequentially in September after an uptick of 0.8% in August. The index is up 6.5% year over year. 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.
Transportation
The transportation index jumped 1.9% sequentially in September after an uptick of 0.5% in August. The index gained 14.6% year over year. SPDR S&P Transportation ETF (XTN - Free Report) has a Zacks Rank #2. Trucking takes about 39.8% of the fund, followed by Airlines (25.81%), Air Freight & Logistics (18.61%).
Auto
The price inflation of new cars has been palpable. The index for new vehicles increased 0.7% in September after rising 0.8% the previous month. The index has gained 9.4% year over year. 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.
Utilities
The index for utility gas service remained hot as it increased 2.9% in September after an increase of 3.5% in August. The index has jumped 33.1% year over year. 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.
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5 Sector ETFs to Win from September Inflation Data
The annual U.S. inflation rate eased for three months in a row to 8.2% in September of 2022, the lowest reading in seven months, compared to 8.3% in August but above market forecasts of 8.1%. Meanwhile, core CPI, which eliminates volatile energy and food prices, increased 6.6% on a year. Core CPI rose 0.6% over the prior month.
Much of the continued rise in core inflation originated from the cost of shelter. Shelter costs makes up a third of CPI. The energy index rose 19.8%, a smaller increase than the 23.8% increase for the period ending August. The food index increased 11.2% over the last year.
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 September, same as August. Year over year, prices are up 6.6%. 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 1% sequentially in September after an uptick of 0.8% in August. The index is up 6.5% year over year. 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.
Transportation
The transportation index jumped 1.9% sequentially in September after an uptick of 0.5% in August. The index gained 14.6% year over year. SPDR S&P Transportation ETF (XTN - Free Report) has a Zacks Rank #2. Trucking takes about 39.8% of the fund, followed by Airlines (25.81%), Air Freight & Logistics (18.61%).
Auto
The price inflation of new cars has been palpable. The index for new vehicles increased 0.7% in September after rising 0.8% the previous month. The index has gained 9.4% year over year. 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.
Utilities
The index for utility gas service remained hot as it increased 2.9% in September after an increase of 3.5% in August. The index has jumped 33.1% year over year. 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.