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Fed Warns of More Rate Hikes to Tame Inflation: ETFs to Buy
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Federal Reserve Chair Jerome Powell emphasized the need for continued vigilance in the battle against inflation in a meeting in Jackson Hole, Wyo on Aug 25. Despite acknowledging some progress, Powell's speech indicated that inflation remains higher than the comfort level for policymakers.
Inflation Concerns Persist
Powell's remarks echoed his sentiments from the previous year's Jackson Hole speech, where he warned of potential challenges ahead due to the Federal Reserve's efforts to rein in inflation. The current speech, however, highlights the fact that inflation levels have not subsided as desired. Powell emphasized that even though inflation has moderated slightly from its peak, it is still at an undesirable level.
Measured Approach Amid Mixed Data
Powell's address indicated the Fed's recognition of the mixed data landscape. Although the summer months saw some easing in the pace of price increases, with core inflation rising by 0.2% for both June and July, Powell stressed that sustained improvement is necessary to build confidence. He cautioned against drawing premature conclusions from a couple of months' data.
Balancing Risks
The Fed Chair acknowledged the inherent risks in policymaking, with the potential for negative consequences arising from both aggressive and insufficient actions. Markets initially reacted with volatility to Powell's speech, reflecting the sensitivity to any hints regarding future policy decisions.
However, as the day progressed, stocks rebounded and Treasury yields experienced mixed movements. Powell's balanced approach seemed to have soothed some concerns, especially considering the market reaction following his speech at Jackson Hole the previous year.
Rates to Remain Higher for Longer?
Rate hike or not, one thing is evident from the latest Fed meetings that interest rates are likely stay elevated for a longer period time. No rate cuts are expected in the near term. Against this backdrop, investors can hedge the higher rates with the below-mentioned ETFs.
The Simplify Interest Rate Hedge ETF seeks to hedge interest rate movements arising from rising long-term interest rates, and to benefit from market stress when fixed income volatility increases, while providing the potential for income. The fund yields 1.16% annually.
The Global X Interest Rate Hedge ETF is an actively managed ETF designed to benefit when long-term interest rates increase. The fund yields 2.75% annually.
FolioBeyond Alternative Income And Interest Rate Hedge ETF (RISR - Free Report)
The FolioBeyond Alternative Income and Interest Rate Hedge ETF is an actively managed exchange-traded fund that seeks to provide diversification benefits and helps to manage risk from interest rate volatility, while generating current income under a wide range of interest rate environments. The fund yields 6.61% annually.
iShares Treasury Floating Rate Bond ETF (TFLO - Free Report)
The underlying Bloomberg U.S. Treasury Floating Rate Index is a market capitalization-weighted index that measures the performance of floating rate public obligations of the U.S. Treasury. The fund charges 15 bps in fees and yields 3.98% annually.
The Ionic Inflation Protection ETF is an actively managed exchange-traded fund that seeks to generate positive returns during periods of elevated and rising inflation and inflation expectations as well as during periods of increasing interest rates and fixed income volatility. The fund yields 3.22% annually.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)
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Fed Warns of More Rate Hikes to Tame Inflation: ETFs to Buy
Federal Reserve Chair Jerome Powell emphasized the need for continued vigilance in the battle against inflation in a meeting in Jackson Hole, Wyo on Aug 25. Despite acknowledging some progress, Powell's speech indicated that inflation remains higher than the comfort level for policymakers.
Inflation Concerns Persist
Powell's remarks echoed his sentiments from the previous year's Jackson Hole speech, where he warned of potential challenges ahead due to the Federal Reserve's efforts to rein in inflation. The current speech, however, highlights the fact that inflation levels have not subsided as desired. Powell emphasized that even though inflation has moderated slightly from its peak, it is still at an undesirable level.
Measured Approach Amid Mixed Data
Powell's address indicated the Fed's recognition of the mixed data landscape. Although the summer months saw some easing in the pace of price increases, with core inflation rising by 0.2% for both June and July, Powell stressed that sustained improvement is necessary to build confidence. He cautioned against drawing premature conclusions from a couple of months' data.
Balancing Risks
The Fed Chair acknowledged the inherent risks in policymaking, with the potential for negative consequences arising from both aggressive and insufficient actions. Markets initially reacted with volatility to Powell's speech, reflecting the sensitivity to any hints regarding future policy decisions.
However, as the day progressed, stocks rebounded and Treasury yields experienced mixed movements. Powell's balanced approach seemed to have soothed some concerns, especially considering the market reaction following his speech at Jackson Hole the previous year.
Rates to Remain Higher for Longer?
Rate hike or not, one thing is evident from the latest Fed meetings that interest rates are likely stay elevated for a longer period time. No rate cuts are expected in the near term. Against this backdrop, investors can hedge the higher rates with the below-mentioned ETFs.
Simplify Interest Rate Hedge ETF (PFIX - Free Report)
The Simplify Interest Rate Hedge ETF seeks to hedge interest rate movements arising from rising long-term interest rates, and to benefit from market stress when fixed income volatility increases, while providing the potential for income. The fund yields 1.16% annually.
Global X Interest Rate Hedge ETF (RATE - Free Report)
The Global X Interest Rate Hedge ETF is an actively managed ETF designed to benefit when long-term interest rates increase. The fund yields 2.75% annually.
FolioBeyond Alternative Income And Interest Rate Hedge ETF (RISR - Free Report)
The FolioBeyond Alternative Income and Interest Rate Hedge ETF is an actively managed exchange-traded fund that seeks to provide diversification benefits and helps to manage risk from interest rate volatility, while generating current income under a wide range of interest rate environments. The fund yields 6.61% annually.
iShares Treasury Floating Rate Bond ETF (TFLO - Free Report)
The underlying Bloomberg U.S. Treasury Floating Rate Index is a market capitalization-weighted index that measures the performance of floating rate public obligations of the U.S. Treasury. The fund charges 15 bps in fees and yields 3.98% annually.
Ionic Inflation Protection ETF (CPII - Free Report)
The Ionic Inflation Protection ETF is an actively managed exchange-traded fund that seeks to generate positive returns during periods of elevated and rising inflation and inflation expectations as well as during periods of increasing interest rates and fixed income volatility. The fund yields 3.22% annually.
(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)