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Is Inflation Burning a Hole in Pocket? Bet on Top-Ranked Cheap ETFs

By Zacks Investment ResearchStock MarketsJan 14, 2022 05:00AM ET
www.investing.com/analysis/is-inflation-burning-a-hole-in-pocket-bet-on-topranked-cheap-etfs-200614834
Is Inflation Burning a Hole in Pocket? Bet on Top-Ranked Cheap ETFs
By Zacks Investment Research   |  Jan 14, 2022 05:00AM ET
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High inflation levels continue to be a serious concern for Americans. Once again, the release of the latest inflation data reports demonstrates the metrics’ touching of record-high levels. It seems like the Federal Reserve is prepared to deal with the high inflation levels this year and will make efforts to bring them to the target range.

The December producer price index increased 9.7% year over year by the recently released reports, coming in at the highest level on record since 2010. Meanwhile, the metric was up 0.2% over the prior month, better than the Dow Jones estimate of 0.4% .

Per the latest Labor Department report, the Consumer Price Index (CPI) in December rose 7% year over year, on par with the Dow Jones estimate, per a CNBC article. The metric came in at the highest level since June 1982 and covers a basket of products, ranging from gasoline and health care to groceries and rents. It also increased 0.5% for the month, surpassing the 0.4% Dow Jones estimate. The soaring food, shelter and used vehicle prices might be primarily responsible for the higher inflation levels.

Excluding food and energy prices, the core CPI was up 0.6%, worse than the estimate of 0.5%. Annual core inflation also increased at a 5.5% pace, in comparison with the 5.4% expectation and came in at the highest level since February 1991 (per a CNBC article).

Notably, the hot inflation data has compelled investors to look for alternative investment options that may fare better than cash or bonds in an inflationary environment. Moreover, certain companies with compromised pricing power may take a severe hit amid inflation and future earnings may also look less attractive amid high inflation levels.

Also, paying high prices for goods is slowly burning a hole in consumers' pockets. Against this backdrop, let’s take a look at some top-ranked ETFs with relatively lower expense ratios that can be considered:

JPMorgan (NYSE:JPM) BetaBuilders U.S. Equity ETF BBUS

Investors have been upbeat about the accelerated coronavirus vaccine rollout, solid fiscal stimulus support and reopening of the U.S. economy, which may lead to faster U.S. economic recovery from the pandemic-led economic slowdown. Market participants are also seemingly coming in terms with the higher chances of a Fed rate hike in 2022 and seem like having pricing in the phenomenon. Moreover, the emergency use authorization (EUA) for Pfizer Inc.’s (NYSE:PFE) antiviral COVID-19 pill, PAXLOVID, has relaxed concerns regarding Omicron to some extent. According to the verified sources, Pfizer might introduce the Omicron vaccine in March while Moderna (NASDAQ:MRNA) is working on a booster that targets the variant.

JPMorgan BetaBuilders U.S. Equity ETF provides simple, affordable access to U.S. large and mid-cap equities. With AUM of $945.8 million, BBUS charges a very nominal fee of 0.02%. JPMorgan BetaBuilders U.S. Equity ETF carries a Zacks ETF Rank #2 (Buy) (read: A Quick Guide to the 25 Cheapest ETFs).

SPDR Portfolio S&P 500 ETF SPLG

The SPDR Portfolio S&P 500 ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Index. SPLG has AUM of $13.67 billion and an expense ratio of 0.03%. The SPDR Portfolio S&P 500 ETF sports a Zacks ETF Rank #2.

Vanguard MidCap ETF VO

Considering the mixed sentiments, mid-cap funds are gaining attention as they provide both growth and stability compared to their small-cap and large-cap counterparts. As such, investors seeking to capitalize on the strong fundamentals but worried about uncertainty should consider mid-cap ETFs.

Vanguard Mid-Cap ETF seeks to track the performance of the CRSP US Mid Cap Index, which measures the investment return of mid-capitalization stocks. VO has AUM of $56.39 billion. Vanguard Mid-Cap ETF charges a fee of 4 basis points (bps). Vanguard MidCap ETF sports a Zacks ETF Rank #2.

SPDR Portfolio S&P 500 Value ETF SPYV

It is worth noting here that value investing seems more lucrative, given the rebounding U.S. economy, the expectation of higher inflation and chances of Fed interest rate hikes. Moreover, value stocks seek to capitalize on market inefficiencies. They can deliver higher returns with lower volatility than their growth and blend counterparts. Additionally, value stocks are less exposed to trending markets and their dividend payouts offer a shield against market turbulence.

SPDR Portfolio S&P 500 Value ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P 500 Value Index. With AUM of $13.46 billion, it charges 4 bps in expense ratio. SPDR Portfolio S&P 500 Value ETF carries a Zacks Rank #1 (Strong Buy).

Schwab U.S. LargeCap Value ETF SCHV

Schwab U.S. Large-Cap Value ETF’s goal is to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Large-Cap Value Total Stock Market Index. With AUM of $10.68 billion, it charges 4 bps in expense ratio. Schwab U.S. Large-Cap Value ETF has a Zacks Rank #1 (read: ETF Strategies to Profit From a Historically Weak September).


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Schwab U.S. LargeCap Value ETF (SCHV): ETF Research Reports

SPDR Portfolio S&P 500 Value ETF (SPYV): ETF Research Reports

Vanguard MidCap ETF (VO): ETF Research Reports

SPDR Portfolio S&P 500 ETF (SPLG): ETF Research Reports

JPMorgan BetaBuilders U.S. Equity ETF (BBUS): ETF Research Reports

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Zacks Investment Research
Is Inflation Burning a Hole in Pocket? Bet on Top-Ranked Cheap ETFs
 

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Is Inflation Burning a Hole in Pocket? Bet on Top-Ranked Cheap ETFs

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