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ETF Winners Despite Slowing U.S. Inflation in September

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Consumer prices in the United States grew 2.3% year over year in September 2018, down from 2.7% in August and below market expectations of 2.4%. It marked the lowest inflation rate in seven months, hurt by a steep slowdown in gas prices and a smaller uptick in fuel and shelter costs. The energy index fell 0.5% in September after increasing in August.

Sequentially, consumer prices grew 0.1%, down from 0.2% in August and expectations of 0.2%. Barring food and energy, prices went up 0.1% in September, in line with August but shy ofmarket forecasts of 0.2%.

Below we highlight a few areas and their related ETFs that have registered an increase in inflation in September.  

Airlines – US Global Jets ETF (JETS - Free Report)

Airline fares rose sequentially in September. So, one can have a look at JETS. The underlying U.S. Global Jets Index tracks the performance of airline companies worldwide with an emphasis on domestic passenger airlines.

Healthcare – iShares US Healthcare Providers ETF (IHF - Free Report)

Year-over-year inflation for medical care services increased to 2% from 1.9%. The medical care index increased sequentially to 0.2% from a decline of 0.2% in August. This helped the fund, which provides exposure to health maintenance organizations, hospitals, clinics, nursing homes rehabilitation & retirement centers. The fund has gained 20.1% so far this year (read: Best ETFs & Stocks From the Top Sector of Q3).

F&B – Invesco Dynamic Food & Beverage ETF (PBJ - Free Report)

There was an increase in the index for food away from home in September. Food away from home index rose 2.6% year over in September. This should bode well for this food ETF. The underlying index of the fund comprises stocks of 30 U.S. food and beverage companies. These are companies that are principally engaged in the manufacture, and sale of food and beverage products, agricultural products and products related to the development of new food technologies.

Transportation services – iShares Transportation Average ETF (IYT - Free Report)

Since year-over-year inflation increased for transportation services from 4% to 3.9% and sequential inflation was 0.5% from 0.3%, this transportation ETF should be under focus.  The underlying index of the fund measures the performance of companies from the Industrial Transportation, Airline and General Industrial Services industries of the U.S. equity market (read: 4 ETF Picks for October).

Real Estate – iShares Mortgage Real Estate Capped ETF (REM - Free Report)

Since the shelter index remained on an upward trajectory and made up over half of the seasonally adjusted monthly risein the overall index, this real estate ETF should benefit from the trend. Plus, demand for real estate should grow in a fast-growing U.S. economy.

TIPS – Schwab U.S. TIPS ETF (SCHP - Free Report)

Though inflation slowed in September, overall the inflation momentum is upbeat in the United States. This may be beneficial for TIPS ETFs.

TIPS offers robust real returns during inflationary periods, unlike its unprotected peers in the fixed-income world. These securities pay an interest on an inflated-principal amount (principal rises with inflation) and when the securities mature, investors get either the inflation-adjusted principal or the original principal, whichever is greater. As a result, both principal amount and interest payments, will keep on rising with increasing consumer prices.

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