4 ETFs to Buy if You’re Worried About Inflation

imageStock Markets21 minutes ago (May 18, 2021 12:30PM ET)

(C) Reuters. 4 ETFs to Buy if You’re Worried About Inflation

The stock market is expected to remain under pressure in the coming months because consumers’ rising purchasing power on the back of fiscal stimulus and an improving job market has been driving inflation. However, in this environment, investors could profit by investing in ETFs that are structured to benefit from inflationary conditions. In this regard, we think iShares TIPS Bond ETF (TIP), Invesco DWA Basic Materials Momentum ETF (PYZ), SPDR Gold Trust (P:GLD (NYSE:GLD)), and Vanguard Real Estate ETF (VNQ) could be solid bets now. Let’s discuss.The stock market has recovered and galloped ahead since a major correction in March 2020. And the U.S. economy has been showing a solid recovery this year, which is evidenced by its 6.4% annual GDP growth in the first quarter of 2021.

Among other favorable economic data, consumer spending is steadily returning to pre-pandemic levels thanks to fiscal stimulus packages and steady job growth. However, this is creating inflationary pressure in the economy. And because investors typically rotate away from stocks to safer, fixed-income assets in an inflationary economy, some experts expect the stock market to be under pressure in the near term.

Notably, the consumer price index (CPI) jumped 4.2% in April 2021 from its year-ago level, its fastest in growth rate 13-years, and increased 0.8% from the prior month. To put things in perspective, consumer spending, which accounts for more than two-thirds of domestic economic activity, also climbed 10.7% in the first quarter of 2021, following a mere 2.3% increase in the fourth quarter of last year. And, according to Statista, the annual rate of inflation this year is expected to be 2.26%. Though the Fed views any rise in inflation as temporary, economists fear that rising inflation might force the central bank to tighten its monetary policies earlier than expected.

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4 ETFs to Buy if You’re Worried About Inflation

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