Looking For Quality Exposure? Buy These ETFs

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Inflation has been playing foul on the stock market lately. The consumer price index for April jumped 4.2% from the year-ago level, representing the sharpest increase since September 2008 and raising concerns that the U.S. economy is overheating.

Rising commodity prices for almost everything from raw materials to food prices to shipping costs has made investors jittery that price pressures will force the central bank to tighten the policies earlier than expected. Additionally, the latest Fed minutes for the first time revealed the possibility of tapering the asset purchase program if the economy continues to show rapid progress. The central bank is currently buying $80 billion worth of Treasury securities and $40 billion worth of mortgage-backed securities per month.

Further, a flare-up in coronavirus cases in parts of Asia has sparked concerns over the pace of a global economic recovery. India, Japan, and other parts of Southeast Asia are battling a fresh surge in cases and tightening restrictions, with relatively slow vaccine rollouts and delays in reopening the economy. Rounds of the latest economic data on the front of manufacturing, jobs, housing, and consumer confidence have added to the chaos.

However, the economy is strongly recovering from the pandemic lows with a wider reach of vaccination, huge infrastructure and stimulus packages, and reopening economies. The combination has powered activities across all sectors and categories, resulting in increased consumer spending. In fact, the U.S. economy grew 6.4% annually in the first quarter, representing the second-strongest increase since 2003 and is expected to top 7% this year, which would be the fastest since 1984, per several economists. This would follow the 3.5% contraction in 2020, which was the worst performance in 74 years. Moreover, the astounding improvement in corporate earnings also bodes well for the stocks.

Against such a backdrop, investors should focus on high-quality investing.

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