Investing

Sector ETFs Likely to Gain on July Inflation Data

Sanghamitra Saha

Published: August 11, 2023 11:19 pm

Last Updated: August 14, 2023 12:22 pm

The consumer price index (CPI) rose 3.2% year over year in July, marking the first significant increase in over a year. However, this was slightly below the anticipated 3.3% forecast. On a monthly basis, prices saw a seasonally adjusted increase of 0.2%, aligning with the Dow Jones estimate, as quoted on CNBC.

Barring the volatile sectors of food and energy, the core CPI also rose by 0.2% for the month. This translates to an annual rate of 4.7%, the lowest since October 2021, and slightly below the Dow Jones consensus estimate of 4.8%.

Against this backdrop, below we highlight a few sectors and their ETFs that could gain ahead.

Shelter and Real Estate

The primary driver for the monthly inflation increase was shelter costs, which surged by 0.4% sequentially and are up 7.7% year over year. The Bureau highlighted that over 90% of the inflation increase was attributed to this category, which constitutes about a third of the CPI weighting.

Investors can consider ETFs like the iShares U.S. Real Estate ETF IYR or the Vanguard Real Estate Index Fund VNQ to gain exposure to this sector, which is experiencing strong demand and rising prices. Both funds have Zacks Rank #3 (Hold).

Restaurants

The food index increased 0.2% sequentially in July. The food away from home index rose 0.2% sequentially in July but crept up 7.1% year over year. Investors may consider ETFs focused on the restaurant industry, such as AdvisorShares Restaurant ETF EATZ to capitalize on the trend.

Transportation Services

The index rose 0.3% sequentially and 9% year over year. The data puts focus on SPDR S&P Transportation ETF XTN. The Zacks Rank #2 (Buy) fund offers exposure Cargo Ground Transportation (31.22%), Passenger Airlines (26.24%), Air Freight & Logistics (17.85%) and Marine (9.34%).

Medical Care Commodities

The index recorded a sequential gain of 0.5% in inflation. Inflation gained 4.1% year over year. The Zacks Rank #2 ETF iShares U.S. Medical Devices ETF IHI, hence, draws attention.  Health Care Equipment (80.34%) takes the top spot in the fund, followed by Life Sciences Tools & Services (19.29%).
Vanguard Real Estate ETF (VNQ): ETF Research Reports

SPDR S&P Transportation ETF (XTN): ETF Research Reports

iShares U.S. Medical Devices ETF (IHI): ETF Research Reports

iShares U.S. Real Estate ETF (IYR): ETF Research Reports

AdvisorShares Restaurant ETF (EATZ): ETF Research Reports

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