ETF Ideas To Hedge Against Rising Inflation

As Americans anticipate an uptick in inflation ahead, ETF investors should begin thinking about re-evaluating their investment portfolios.

Consumer prices have risen at such a sluggish pace that economists have grown wary of the United States’ economic health, despite the steadily expanding economy and robust job market. The depressed inflationary levels have also been a key factor behind the Federal Reserve’s decision to maintain interest rates at historical lows.

More recently, the price index for personal-consumption expenditures, the Fed’s main measure of inflation, rose to 1.8% in November year-over-year, which remained short of the Fed’s 2% target annually.

However, expectations have risen in recent months. According to Tradeweb data, expected annual inflation over the next five years was up to 1.85% and for the next decade increased to 1.95% – both numbers were taken from the differential between nominal and inflation-adjusted Treasury yields, the Wall Street Journal reports.

According to a new University of Michigan Survey, consumer expectations for inflation over the next year was up to 2.7% in December from 2.5% in November and 2.4% in October. Over the next five years, expected inflation is 2.4%.

Furthermore, market observers warned that President Donald Trump’s economic plans including the recent tax bill could push growth higher and fuel inflationary pressures. Meanwhile, falling unemployment rates and rising wages could also add to higher consumer prices.