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The U.S. economy has been experiencing sticky inflation, higher rates and slower growth, meaning a stagflationary scenario. The Fed meeting in September projects that the Fed Funds rate will increase to 5.6% by the end of 2023, and then slip to 5.1% in 2024 and 3.9% in 2025.
Meanwhile, the Fed stayed put in November. This indicates one additional 25 basis point rate hike by the end of the year. Median PCE inflation is expected to be 3.3% in 2023, 2.5% in 2024 and 2.2% in 2025 while real GDP date is expected to be 2.1% in 2023, 1.5% in 2024 and 1.8% in 2025.
Personal spending in the United States rose by 0.7% from a month earlier in September 2023, following a 0.4% increase in August and beating the market consensus of a 0.5% advance. Spending on services saw a considerable uptick of 0.8%, while spending on goods also rose by 0.7%.
Notably, during stagflation, individuals’ savings accounts suffer as currency inflation cuts the value of their low-yield investments. Hence, one needs to resort to the stock market for inflation-beating gains. Against this backdrop, below we highlight a few ETF strategies that could safeguard your portfolio.
Try Out Inflation-Beating Products
Against this backdrop, we suggest a few ETFs that can be worth investing at the time of higher inflation.
Merk Stagflation ETF
The ETF looks to track the price and yield performance of the Solactive Stagflation Index (SOLSTAGF), which seeks to follow the performance of components that are expected to benefit, either directly or indirectly, from persistent inflation, including in an environment of weak economic growth (stagflation).
The fund’s key holdings are Schwab U.S. TIPS ETF (SCHP) (69.08%), Invesco DB Oil Fund (DBO) (12.36%), Vaneck Merk Gold Shares (OUNZ) (10.27%), Vanguard Real Estate ETF (VNQ) (8.30%) and U.S. Dollar (8.30%). The fund charges 44 bps in fees and yields 3.05% 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 (28%), homebuilders (18.40%), commodities (17.50%), land development (17.10%), homebuilders (15.97%), commodity REITs (12.30%) and real estate technology (6.70%). The expense ratio of IWIN is 0.92%.
AXS Astoria Inflation Sensitive ETF is an actively managed, broadly diversified ETF that seeks long-term capital appreciation in inflation-adjusted returns. Renowned ETF experts at Astoria Portfolio Advisors manage PPI by investing where the opportunities are: cyclical stocks (such as natural resources, energy, industrials and materials), commodities and TIPS. The fund charges 76 bps in fees and yields 3.33% annually.
The underlying Fidelity Stocks for Inflation Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies with attractive valuations, high quality profiles and positive momentum signals, emphasizing industries that tend to outperform in inflationary environments. The fund charges 29 bps in fees and yields 1.97% annually.
The Quadratic Interest Rate Volatility and Inflation Hedge ETF is actively managed and seeks to achieve its investment objective primarily by investing, directly or indirectly, in a mix of U.S. Treasury Inflation-Protected Securities and long options tied to the shape of the U.S. interest rate curve. The expense ratio of the fund is 1.03%. It yields 3.77% annually.
The actively managed ETF seeks long-term growth of capital in real (inflation-adjusted) terms. It seeks to achieve its investment objective by investing primarily in domestic and foreign equity securities of companies that are expected to benefit, either directly or indirectly, from rising prices of real assets (i.e., assets whose value is mainly derived from physical properties such as commodities) such as those whose revenues are expected to increase with inflation without corresponding increases in expenses. It charges 85 bps in fees.
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ETFs to Play Amid Stagflation
The U.S. economy has been experiencing sticky inflation, higher rates and slower growth, meaning a stagflationary scenario. The Fed meeting in September projects that the Fed Funds rate will increase to 5.6% by the end of 2023, and then slip to 5.1% in 2024 and 3.9% in 2025.
Meanwhile, the Fed stayed put in November. This indicates one additional 25 basis point rate hike by the end of the year. Median PCE inflation is expected to be 3.3% in 2023, 2.5% in 2024 and 2.2% in 2025 while real GDP date is expected to be 2.1% in 2023, 1.5% in 2024 and 1.8% in 2025.
Personal spending in the United States rose by 0.7% from a month earlier in September 2023, following a 0.4% increase in August and beating the market consensus of a 0.5% advance. Spending on services saw a considerable uptick of 0.8%, while spending on goods also rose by 0.7%.
Notably, during stagflation, individuals’ savings accounts suffer as currency inflation cuts the value of their low-yield investments. Hence, one needs to resort to the stock market for inflation-beating gains. Against this backdrop, below we highlight a few ETF strategies that could safeguard your portfolio.
Try Out Inflation-Beating Products
Against this backdrop, we suggest a few ETFs that can be worth investing at the time of higher inflation.
Merk Stagflation ETF
The ETF looks to track the price and yield performance of the Solactive Stagflation Index (SOLSTAGF), which seeks to follow the performance of components that are expected to benefit, either directly or indirectly, from persistent inflation, including in an environment of weak economic growth (stagflation).
The fund’s key holdings are Schwab U.S. TIPS ETF (SCHP) (69.08%), Invesco DB Oil Fund (DBO) (12.36%), Vaneck Merk Gold Shares (OUNZ) (10.27%), Vanguard Real Estate ETF (VNQ) (8.30%) and U.S. Dollar (8.30%). The fund charges 44 bps in fees and yields 3.05% 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 (28%), homebuilders (18.40%), commodities (17.50%), land development (17.10%), homebuilders (15.97%), commodity REITs (12.30%) and real estate technology (6.70%). The expense ratio of IWIN is 0.92%.
AXS Astoria Inflation Sensitive ETF (PPI - Free Report)
AXS Astoria Inflation Sensitive ETF is an actively managed, broadly diversified ETF that seeks long-term capital appreciation in inflation-adjusted returns. Renowned ETF experts at Astoria Portfolio Advisors manage PPI by investing where the opportunities are: cyclical stocks (such as natural resources, energy, industrials and materials), commodities and TIPS. The fund charges 76 bps in fees and yields 3.33% annually.
Fidelity Stocks For Inflation ETF (FCPI - Free Report)
The underlying Fidelity Stocks for Inflation Factor Index reflects the performance of stocks of large and mid-capitalization U.S. companies with attractive valuations, high quality profiles and positive momentum signals, emphasizing industries that tend to outperform in inflationary environments. The fund charges 29 bps in fees and yields 1.97% annually.
Quadratic Interest Rate Volatility And Inflation Hedge ETF (IVOL - Free Report)
The Quadratic Interest Rate Volatility and Inflation Hedge ETF is actively managed and seeks to achieve its investment objective primarily by investing, directly or indirectly, in a mix of U.S. Treasury Inflation-Protected Securities and long options tied to the shape of the U.S. interest rate curve. The expense ratio of the fund is 1.03%. It yields 3.77% annually.
Horizon Kinetics Inflation Beneficiaries ETF (INFL - Free Report)
The actively managed ETF seeks long-term growth of capital in real (inflation-adjusted) terms. It seeks to achieve its investment objective by investing primarily in domestic and foreign equity securities of companies that are expected to benefit, either directly or indirectly, from rising prices of real assets (i.e., assets whose value is mainly derived from physical properties such as commodities) such as those whose revenues are expected to increase with inflation without corresponding increases in expenses. It charges 85 bps in fees.