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4 Sector ETFs to Win from February Inflation Data

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The annual inflation rate in the United States slowed to 6% in February of 2023, the lowest since September of 2021, in line with market forecasts, and compared to 6.4% in January.

Compared to the previous month, the CPI increased 0.4%, following a prior 0.5% gain and also matching forecasts. The core rate, however, inched up to 0.5% from 0.4%, compared to forecasts of 0.4%.

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

Consumer Staples

The food index increased 0.4% in February, and the food at home index rose 0.3% sequentially. Five of the six major grocery store food group indexes gained over the month. The index for non-alcoholic beverages rose 1.0% in February, after a 0.4% increase the previous month. The indexes for other food at home and for cereals and bakery products each rose 0.3% sequentially.

Zacks Rank #2 Consumer Staples Select Sector SPDR ETF (XLP - Free Report) looks to track the Consumer Staples Select Sector Index. Beverages (27.61%), household products (21.9%), food & staples retailing (19.3%) and food products (19.1%) are four top industries in the fund.

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. The price index for shelter was the largest contributor to the monthly all items increase in February, making up over 70% of the increase. Shelter costs rose 8% in February. Rising home prices also boosted the demand for real estate. Year-over-year, costs increased 8.1%.

Kelly Residential & Apartment Real Estate ETF (RESI - Free Report) should thus win. The underlying Strategic Residential & Apartment Real Estate Sector Index is a rules-based index that consists of U.S. and Canada-listed companies engaged in Apartment Buildings, Single-Family Rental Homes, Student Housing or Manufactured Homes. The fund yields 6.32% annually.


The transportation index jumped 1.1% sequentially in February after an uptick of 0.9% in January. The index gained 14.6% year over year. The airline fares index rose 6.4%, ending a string of four successive declines. SPDR S&P Transportation ETF (XTN - Free Report) has a Zacks Rank #2.

Trucking takes about 39.92% of the fund, followed by Airlines (26.37%), Air Freight & Logistics (19.07%).


The energy index rose 5.2% year over year. The fuel oil index shot up 9.2% year over year, while the index for electricity edged up 12.9%, and the index for natural gas increased 14.3% over the same period. Zacks Rank #2 Invesco Dynamic Oil & Gas Services ETF (PXJ - Free Report) could be a good play here.

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