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4 Sector ETFs & Stocks to Benefit From Hot Inflation

U.S. inflation jumped in March, surpassing expectations primarily due to higher petrol and shelter costs, dashing hopes of a June interest rate cut by the Fed. The U.S. consumer price index (CPI) rose by 0.4% sequentially, exceeding estimates from Wall Street.

Over the 12-month period ending in March, the CPI recorded a 3.5% year-over-year increase, marking the largest gain in six months since September 2023. This follows a 3.2% rise in February 2024.

Core prices, which exclude volatile food and energy costs, rose 3.8% from the previous year, maintaining the same year-over-year rise as observed in February.

Against this backdrop, below we highlight a few sector ETFs that may gain in the near term.

Sector ETFs to Gain

Transportation – SPDR S&P Transportation ETF (XTN)

The transportation index jumped 1.5% sequentially in March and rose 10.7% year over year.

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The fund XTN tracks the S&P Transportation Select Industry Index, which represents the transportation segment of the S&P Total Market Index. The fund has a Zacks Rank #2 (Buy).

As far as important stocks are concerned, Zacks Rank #3 (Hold) FedEx FDX may be played. It is the leader in global express delivery services. The company provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the FedEx brand.

Energy – iShares U.S. Oil Equipment & Services ETF (IEZ)

The energy sector, which includes oil and gas companies, has historically offered upbeat performance in a rising inflationary environment. Such firms beat inflation 74% of the time and delivered an annual real return of 12.9% per year on average, per a research report of Hartford Funds.

Revenues of energy stocks are tied to energy prices, a key component of inflation indices. This time, too, the rise in oil prices pushed up inflation globally. Oil prices rose lately as producers forecast demand growth amid limited scope for supply growth.

The underlying Dow Jones US Select Oil Equip & Serv Ind is a free-float adjusted market capitalization-weighted index. It measures the performance of oil equipment & services sector of US equity market by including companies that are suppliers of equipment or services to oil fields & offshore platforms, such as drilling, exploration, engineering, logistics, seismic information services & platform construction.

 

As far as important energy stocks are concerned, Zacks Rank #1 (Strong Buy) Murphy USA MUSA appears to be a good bet. It is a leading independent retailer of motor fuel and convenience merchandise in the United States.

Real Estate – Real Estate Select Sector SPDR ETF (XLRE)

Weighted shelter makes up 32.77% of CPI, of which 7.8% is rent and 23.68% is private housing, per data from MacroMicro. The shelter index jumped 0.4% in March. Costs increased 5.7% annually.

The underlying Real Estate Select Sector Index includes securities of companies from the following industries real estate management and development and REITs, excluding mortgage REITs. The fund yields 3.40% annually and charges 9 bps in fees.

Meanwhile, Host Hotels & Resorts HST, has a Zacks Rank #1 (Strong Buy). It is one of the leading lodging real estate investment trusts (REITs), which engages in the ownership, acquisition and redevelopment of luxury and upper-upscale hotels in the United States and abroad.

HealthcareHealth Care Select Sector SPDR ETF XLV

The index rose 0.6% sequentially in March. The index has advanced 2.1% annually.

The underlying Health Care Select Sector Index includes companies from the following industries: pharmaceuticals; health care providers & services; health care equipment & supplies; biotechnology; life sciences tools & services; and health care technology.

HCA Healthcare HCA, which has a Zacks Rank #2 deserves a mention. It is the largest non-governmental operator of acute care hospitals in the United States.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Host Hotels & Resorts, Inc. (HST) : Free Stock Analysis Report

FedEx Corporation (FDX) : Free Stock Analysis Report

Murphy USA Inc. (MUSA) : Free Stock Analysis Report

HCA Healthcare, Inc. (HCA) : Free Stock Analysis Report

Health Care Select Sector SPDR ETF (XLV): ETF Research Reports

iShares U.S. Oil Equipment & Services ETF (IEZ): ETF Research Reports

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

Real Estate Select Sector SPDR ETF (XLRE): ETF Research Reports

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Zacks Investment Research