4 ETFs To Gain From Hotter-Than-Expected Inflation

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Inflation in the United States was higher-than-expected, indicating the Federal Reserve to likely remain aggressive in its monetary tightening campaign to restore price stability. The consumer price index climbed 8.3% year over year in August, down from an 8.5% rise in July but higher than an 8.1% increase, as expected by analysts.

Inflation also rose 0.1% from July and is still hovering near a 40-year high, dashing investors’ hopes with the possibility that price pressures would weaken, allowing the Fed to slow its pace of interest rate increases in the coming months. The data put ETFs like First Trust Nasdaq Food & Beverage ETF (FTXG - Free Report), Invesco Dynamic Food & Beverage ETF (PBJ - Free Report), AdvisorShares Restaurant ETF (EATZ - Free Report), and iShares U.S. Home Construction ETF (ITB - Free Report) in focus.

Behind the Inflation Numbers

Declining gasoline prices were offset by gains in the costs of rent and food. The overall cost of food rose 11.4%, the highest increase since May 1979. In particular, grocery prices increased 13.5% year over year, the largest annual increase since March 1979. The cost of shelter, which comprises nearly a third of the index, recorded its largest increase of 0.7% month over month since January 1991. The cost of medical care rose 0.7% in August after a 0.4% increase in July, with major medical care component indexes climbing across the board.

The so-called core inflation, which strips out volatile components, such as food and energy prices, rose 0.6% from the prior month’s level.

The data raised the bets for the longer-than-expected aggressive rate hike policy by the Fed. The central bank is expected to raise interest rates by a full percentage point next week. According to CME Group’s FedWatch Tool, investors are pricing an 82% chance of a 0.75% rate hike next week and an 18% chance of a full-percentage-point hike.

ETFs in Focus

First Trust Nasdaq Food & Beverage ETF (FTXG)

First Trust Nasdaq Food & Beverage ETF offers exposure to U.S. companies within the food and beverage industry. It tracks the Nasdaq US Smart Food & Beverage Index, holding 30 securities in its basket, with each accounting for less than 8.1% share.

First Trust Nasdaq Food & Beverage ETF has an AUM of $904.9 million and charges 60 bps of annual fees. It sees an average daily volume of about 113,000 shares and has a Zacks ETF Rank #3 (Hold).

Invesco Dynamic Food & Beverage ETF (PBJ)

Invesco Dynamic Food & Beverage ETF offers exposure to 31 stocks engaged in manufacturing, selling, or distributing food and beverage products, agricultural products, and products related to the development of new food technologies by tracking the Dynamic Food & Beverage Intellidex Index.

With an AUM of $334.1 million, Invesco Dynamic Food & Beverage ETF charges 63 bps of annual fees from investors and sees a light average daily volume of 82,000 shares. PBJ has a Zacks ETF Rank #3 with a Medium risk outlook.

AdvisorShares Restaurant ETF (EATZ)

AdvisorShares Restaurant ETF is an actively managed and the only ETF investing exclusively in the restaurant and food service industry, including restaurants, bars, pubs, fast food, take-out facilities, food catering services, and more. AdvisorShares Restaurant ETF holds 27 securities in its basket with a higher concentration on the top firm.

AdvisorShares Restaurant ETF gathered $3 million in its asset base. EATZ charges 99 bps as annual fees and trades in an average daily volume of 1,000 shares.

iShares U.S. Home Construction ETF (ITB)

iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufactures residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With an AUM of $1.3 billion, it holds a basket of 47 stocks with a heavy concentration on the top two firms.

iShares U.S. Home Construction ETF charges 39 bps of annual fees and trades in a heavy volume of around 3 million shares a day on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #3 with a High risk outlook.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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