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PCE Inflation Jumps the Most Since June: 5 ETFs to Play
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The Federal Reserve's preferred inflation measure increased in January at its fastest clip since June, an ominous sign that price pressures remain deep-rooted in the U.S. economy and could lead the Fed to further interest rate hikes well into this year. Consumer prices rose 0.6% sequentially in January, up sharply from a 0.2% sequential increase in December. On a year-over-year basis, prices rose 5.4%, up from a 5.3% annual increase in December.
Barring volatile food and energy prices, so-called core inflation increased 0.6% from December, up from a 0.4% rise the previous month. And compared with a year earlier, core inflation was up 4.7% in January, versus 4.6% year-over-year gains in December. The report also showed that consumer spending increased 1.8% sequentially in January after falling the previous month.
“Reaccelerating price pressures, coupled with a still-strong labor market that is restoring incomes and is supporting demand, will keep the Fed on track to hike rates further over coming meetings,’’ said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, as quoted on AP.
Against this backdrop, below, we highlight a few inflation-beating ETFs to profit out of this situation.
The FTSE 30-Year TIPS (Treasury Rate-Hedged) Index tracks the performance of long positions in the most recently issued 30-year TIPS and duration-adjusted short positions in U.S. Treasury bonds of, in the aggregate, approximate equivalent duration dollars to the TIPS. The fund charges 30 bps in fees.
The Ionic Inflation Protection ETF is an actively managed ETF, which looks to generate positive returns during periods of rising inflation and inflation expectations as well as during periods of increasing long-term interest rates and fixed-income volatility.
The fund invests primarily in a portfolio of inflation swap agreements on the Consumer Price Index, interest rate swaps, swaptions and U.S. Treasury Obligations, including U.S. Treasury Inflation-Protected Securities or TIPS. Cash takes a considerable portion of the fund.
The VanEck Inflation Allocation ETF seeks long-term total return. It also maximizes real returns while seeking to reduce downside risk during sustained market declines by allocating primarily to exchange-traded products that provides exposure to real assets, which include commodities, real estate, natural resources, and infrastructure. The fund charges 87 bps in fees.
The underlying Solactive Stagflation Index tracks the performance of components that are expected to benefit, either directly or indirectly, from persistent inflation, including in an environment of weak economic growth. The fund charges 45 bps in fees and yields about 3.94% annually.
IWIN is an actively managed ETF, investing in asset classes that look to benefit, either directly or indirectly, from inflation. IWIN intends to provide investors with long-term capital appreciation in inflation-adjusted terms.
The portfolio includes an active mix of asset miners, commodities, land development, homebuilders, commodity REITs and real estate technology. The expense ratio of IWIN is 0.85%.
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PCE Inflation Jumps the Most Since June: 5 ETFs to Play
The Federal Reserve's preferred inflation measure increased in January at its fastest clip since June, an ominous sign that price pressures remain deep-rooted in the U.S. economy and could lead the Fed to further interest rate hikes well into this year. Consumer prices rose 0.6% sequentially in January, up sharply from a 0.2% sequential increase in December. On a year-over-year basis, prices rose 5.4%, up from a 5.3% annual increase in December.
Barring volatile food and energy prices, so-called core inflation increased 0.6% from December, up from a 0.4% rise the previous month. And compared with a year earlier, core inflation was up 4.7% in January, versus 4.6% year-over-year gains in December. The report also showed that consumer spending increased 1.8% sequentially in January after falling the previous month.
“Reaccelerating price pressures, coupled with a still-strong labor market that is restoring incomes and is supporting demand, will keep the Fed on track to hike rates further over coming meetings,’’ said Rubeela Farooqi, chief U.S. economist at High Frequency Economics, as quoted on AP.
Against this backdrop, below, we highlight a few inflation-beating ETFs to profit out of this situation.
ETFs in Focus
ProShares Inflation Expectations ETF (RINF - Free Report)
The FTSE 30-Year TIPS (Treasury Rate-Hedged) Index tracks the performance of long positions in the most recently issued 30-year TIPS and duration-adjusted short positions in U.S. Treasury bonds of, in the aggregate, approximate equivalent duration dollars to the TIPS. The fund charges 30 bps in fees.
Ionic Inflation Protection ETF (CPII - Free Report)
The Ionic Inflation Protection ETF is an actively managed ETF, which looks to generate positive returns during periods of rising inflation and inflation expectations as well as during periods of increasing long-term interest rates and fixed-income volatility.
The fund invests primarily in a portfolio of inflation swap agreements on the Consumer Price Index, interest rate swaps, swaptions and U.S. Treasury Obligations, including U.S. Treasury Inflation-Protected Securities or TIPS. Cash takes a considerable portion of the fund.
VanEck Inflation Allocation ETF (RAAX - Free Report)
The VanEck Inflation Allocation ETF seeks long-term total return. It also maximizes real returns while seeking to reduce downside risk during sustained market declines by allocating primarily to exchange-traded products that provides exposure to real assets, which include commodities, real estate, natural resources, and infrastructure. The fund charges 87 bps in fees.
Merk Stagflation ETF (STGF - Free Report)
The underlying Solactive Stagflation Index tracks the performance of components that are expected to benefit, either directly or indirectly, from persistent inflation, including in an environment of weak economic growth. The fund charges 45 bps in fees and yields about 3.94% annually.
Amplify Inflation Fighter ETF (IWIN - Free Report)
IWIN is an actively managed ETF, investing in asset classes that look to benefit, either directly or indirectly, from inflation. IWIN intends to provide investors with long-term capital appreciation in inflation-adjusted terms.
The portfolio includes an active mix of asset miners, commodities, land development, homebuilders, commodity REITs and real estate technology. The expense ratio of IWIN is 0.85%.