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Consumer Inflation in the United States cooled down further in March as the consumer price index rose 0.1% in the month, following a 0.4% increase in February. Annual inflation also dropped from 6% to 5%, the smallest annual gain since May 2021, and is now down by almost half from its peak of more than 9% in June last year.
U.S. Producer Price Index (PPI) too recorded the biggest annual decline since January 2021. The Producer Price Index for final demand declined 0.5% in March. The PPI rise of -0.5% in March came in against the expected PPI of 0.1%. On the year-on-year basis, the March PPI inflation increased 2.7%, against the expected rise of 3%. Whereas the year-on-year PPI inflation rise in February was 4.9%.
The significant downside surprise in U.S. PPI has led people to believe that the Fed will soon be done with the policy tightening and may even start to cut rates before the end of the year. If this happens, we may see the comeback of risk-on trade sentiments ahead despite the regional banking crisis emanating in Mar 2023.
Against this backdrop, below we highlight a few ETF areas that should be under the radar.
Overall Growth
The cues of cooling Fed rate hike momentum should bode well for growth investing (as the segment performs better in a falling rate environment) as the segment has suffered a lot in 2022. The segment has started to benefit from the start of 2023 and may exhibit an uptrend in the coming days if the inflation figures keep coming low. Fidelity Blue Chip Growth ETF (FBCG - Free Report) andVanguard Mega Cap Growth (MGK - Free Report) have gained about 2.2% each on Apr 13, 2023.
Technology
Technology stocks are high-growth in nature. These stocks hit rough weather last year as surging inflation weighed on their lofty valuations. Rising rate worries had dampened the appeal of the stocks that rely on easy borrowing for superior growth. Hence, shares of high-growth technology companies has remained in a tight spot in 2022.
However, things have been changing now for the better. Most big and mdi-sized tech companies are on a cost-cutting mode thanks to waning consumer demand, subdued ad spending, and inflationary pressure on wages and products. This could boost tech companies’ profitability too. US Technology iShares ETF (IYW - Free Report) and Fidelity Info Tech MSCI ETF (FTEC - Free Report) was up 2% each on Apr 13, 2023.
Gold Miners
Due to falling inflation and chances of a less-hawkish Fed dragged down the U.S. dollar this year. Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) is off 1% this year. The decline in the dollar is good for raw materials and commodities as these are priced in the U.S. dollar. As a result, SPDR Gold Shares (GLD - Free Report) gained 10% this year due to a sudden dollar weakness and the banking crisis in the United States. Since mining stocks act as a leveraged play of the underlying metal, gold miners gained yesterday. VanEck Gold Miners ETF (GDX - Free Report) was up 2.7% on Apr 13.
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U.S. Inflation Cools: 3 ETF Areas to Soar
Consumer Inflation in the United States cooled down further in March as the consumer price index rose 0.1% in the month, following a 0.4% increase in February. Annual inflation also dropped from 6% to 5%, the smallest annual gain since May 2021, and is now down by almost half from its peak of more than 9% in June last year.
U.S. Producer Price Index (PPI) too recorded the biggest annual decline since January 2021. The Producer Price Index for final demand declined 0.5% in March. The PPI rise of -0.5% in March came in against the expected PPI of 0.1%. On the year-on-year basis, the March PPI inflation increased 2.7%, against the expected rise of 3%. Whereas the year-on-year PPI inflation rise in February was 4.9%.
The significant downside surprise in U.S. PPI has led people to believe that the Fed will soon be done with the policy tightening and may even start to cut rates before the end of the year. If this happens, we may see the comeback of risk-on trade sentiments ahead despite the regional banking crisis emanating in Mar 2023.
Against this backdrop, below we highlight a few ETF areas that should be under the radar.
Overall Growth
The cues of cooling Fed rate hike momentum should bode well for growth investing (as the segment performs better in a falling rate environment) as the segment has suffered a lot in 2022. The segment has started to benefit from the start of 2023 and may exhibit an uptrend in the coming days if the inflation figures keep coming low. Fidelity Blue Chip Growth ETF (FBCG - Free Report) andVanguard Mega Cap Growth (MGK - Free Report) have gained about 2.2% each on Apr 13, 2023.
Technology
Technology stocks are high-growth in nature. These stocks hit rough weather last year as surging inflation weighed on their lofty valuations. Rising rate worries had dampened the appeal of the stocks that rely on easy borrowing for superior growth. Hence, shares of high-growth technology companies has remained in a tight spot in 2022.
However, things have been changing now for the better. Most big and mdi-sized tech companies are on a cost-cutting mode thanks to waning consumer demand, subdued ad spending, and inflationary pressure on wages and products. This could boost tech companies’ profitability too. US Technology iShares ETF (IYW - Free Report) and Fidelity Info Tech MSCI ETF (FTEC - Free Report) was up 2% each on Apr 13, 2023.
Gold Miners
Due to falling inflation and chances of a less-hawkish Fed dragged down the U.S. dollar this year. Invesco DB US Dollar Index Bullish Fund (UUP - Free Report) is off 1% this year. The decline in the dollar is good for raw materials and commodities as these are priced in the U.S. dollar. As a result, SPDR Gold Shares (GLD - Free Report) gained 10% this year due to a sudden dollar weakness and the banking crisis in the United States. Since mining stocks act as a leveraged play of the underlying metal, gold miners gained yesterday. VanEck Gold Miners ETF (GDX - Free Report) was up 2.7% on Apr 13.