How will the Federal Reserve’s recent rate cut affect exchange traded funds (ETFs) in the near future?

In general, the stock market has fared well recently; however, many analysts believe the rate cut will temporarily add cash to the economy to fuel companies’ flexibility to raise prices. Eleanor Laise for The Wall Street Journal reports that additional market trends such as soaring commodity prices and the falling dollar signal inflation might be looming ahead. Some ETFs are available that might protect investors portfolios against inflation.

  • iShares Lehman TIPS Bond (TIP) – TIPs are Treasury securities whose principal is regularly adjusted based on changes within the consumer price index. Currently, TIP is up 6.2% year-to-date.
  • streetTracks Gold Shares (GLD) and United States Oil Fund (USO) – These ETFs track specific commodities. Currently, GLD is up 16.9% year-to-date, and USO is up 21.2% year-to-date.
  • PowerShares DB Commodity Index Tracking Fund (DBC) or iShares S&P GSCI Commodity-IndexedTrust (GSG) – These are broader commodity baskets. Currently, DBC is up 14.7% year-to-date, and GSG is up 17.7% year-to-date.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.