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4 Sector ETFs to Win from 2-Year Low June Inflation Data
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The U.S. consumer inflation rate took a dip to 3.0% in June 2023, marking the lowest since March 2021 and slightly below market expectations of 3.1%. This decline was primarily driven by easy comparison. The decrease in energy prices, predominantly gasoline and electricity, mainly helped the decline happen. The core rate, which bars items like food and energy, has slowed to 4.8%, the lowest since October 2021.
Energy costs fell 16.7%. inflation slowed for food (5.7% vs 6.7% in May) and shelter (7.8% versus 8% in May). There were also smaller price increases new vehicles (4.1% vs 4.7% in May), apparel (3.1% vs 3.5% in May), and transportation services (8.2% vs 10.2% in May). The cost of medical services was down 0.8%.
For investors, the cooling of inflation might ease concerns over a rapid sequence of interest rate hikes, which could be beneficial for equity markets. On the other hand, certain sectors, continue to see price increases, indicating potential areas of investment focus.
Against this backdrop, below we highlight a few sector ETFs that should gain in the near term.
The food index increased 0.1% in June. The food at home index was unchanged over the month, after a 0.1% uptick in May. The food at home index rose 4.7% year over year. The index for cereals and bakery products rose 8.8%.
Zacks Rank #2 Consumer Staples Select Sector SPDR ETF (XLP - Free Report) looks to track the Consumer Staples Select Sector Index. Beverages, household products, food & staples retailing and food products are four top industries in the fund.
The index for food away from home rose 7.7% year over year. The index for full-service meals jumped 6.2%, while the index for limited-service meals surged 7.8% from the year-ago period. The index for full-service meals increased 0.3% sequentially and the index for limited-service meals increased 0.4% from May 2023.
The AdvisorShares Restaurant ETF is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the restaurant business.
Real Estate – Kelly Residential & Apartment Real Estate ETF
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 shelter index rose 0.4% over the month after gaining 0.6% in May. Shelter costs jumped 7.8% year over year.
The ETF RESI 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 6.53% annually.
The transportation index jumped 0.1% sequentially in June after an uptick of 0.8% in May. The index gained 8.2% year over year. SPDR S&P Transportation ETF (XTN - Free Report) has a Zacks Rank #2. Trucking takes about 40% of the fund, followed by Airlines and Air Freight & Logistics.
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4 Sector ETFs to Win from 2-Year Low June Inflation Data
The U.S. consumer inflation rate took a dip to 3.0% in June 2023, marking the lowest since March 2021 and slightly below market expectations of 3.1%. This decline was primarily driven by easy comparison. The decrease in energy prices, predominantly gasoline and electricity, mainly helped the decline happen. The core rate, which bars items like food and energy, has slowed to 4.8%, the lowest since October 2021.
Energy costs fell 16.7%. inflation slowed for food (5.7% vs 6.7% in May) and shelter (7.8% versus 8% in May). There were also smaller price increases new vehicles (4.1% vs 4.7% in May), apparel (3.1% vs 3.5% in May), and transportation services (8.2% vs 10.2% in May). The cost of medical services was down 0.8%.
For investors, the cooling of inflation might ease concerns over a rapid sequence of interest rate hikes, which could be beneficial for equity markets. On the other hand, certain sectors, continue to see price increases, indicating potential areas of investment focus.
Against this backdrop, below we highlight a few sector ETFs that should gain in the near term.
Sector ETFs to Gain
Consumer Staples – Consumer Staples Select Sector SPDR ETF (XLP - Free Report)
The food index increased 0.1% in June. The food at home index was unchanged over the month, after a 0.1% uptick in May. The food at home index rose 4.7% year over year. The index for cereals and bakery products rose 8.8%.
Zacks Rank #2 Consumer Staples Select Sector SPDR ETF (XLP - Free Report) looks to track the Consumer Staples Select Sector Index. Beverages, household products, food & staples retailing and food products are four top industries in the fund.
Restaurants – AdvisorShares Restaurant ETF (EATZ - Free Report)
The index for food away from home rose 7.7% year over year. The index for full-service meals jumped 6.2%, while the index for limited-service meals surged 7.8% from the year-ago period. The index for full-service meals increased 0.3% sequentially and the index for limited-service meals increased 0.4% from May 2023.
The AdvisorShares Restaurant ETF is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the restaurant business.
Real Estate – Kelly Residential & Apartment Real Estate ETF
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 shelter index rose 0.4% over the month after gaining 0.6% in May. Shelter costs jumped 7.8% year over year.
The ETF RESI 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 6.53% annually.
Transportation – SPDR S&P Transportation ETF (XTN - Free Report)
The transportation index jumped 0.1% sequentially in June after an uptick of 0.8% in May. The index gained 8.2% year over year. SPDR S&P Transportation ETF (XTN - Free Report) has a Zacks Rank #2. Trucking takes about 40% of the fund, followed by Airlines and Air Freight & Logistics.