With inflation pushing higher, American consumers are well aware of what’s to come and foresee more pain ahead for the next six months, according to a Gallup poll.
The Federal Reserve is expected to start raising rates this year. Determining how many rate raises will happen depends on who you ask.
For example, global investment firm Goldman Sachs is forecasting five rate hikes. Based on other key data like rising wage inflation, Goldman Sachs expects the Fed to be more hawkish than anticipated.
That falls in line with the Gallup poll, which indicates that Americans expect inflation to continue its upward trend.
“More Americans expect several key U.S. economic trends to continue in the direction they have generally gone over the past several months rather than to reverse course,” the Gallup news article says. “This includes predictions of rising inflation, rising stock values and declining unemployment.”
“Nearly eight in 10 Americans expect inflation to go up, including half who anticipate it will increase ‘a lot,'” the article says further. “A similar percentage of U.S. adults, 78%, expect interest rates to rise.”
2 ETFs to Stave Off Inflation
While it’s impossible to completely sidestep the effects of inflation while getting bond exposure, investors can get into the right exposure. One way is by limiting duration with bond-focused ETFs with debt holdings that have shorter maturity dates.
One ETF to consider is the Vanguard Ultra-Short Bond ETF (VUSB). It’s just one of the many choices offered by Vanguard, which has a bond fund to fit any investment scenario.
With its low 0.10% expense ratio, VUSB’s investment objective is to seek to provide current income while maintaining limited price volatility. The fund invests in a diversified portfolio of high-quality and, to a lesser extent, medium-quality fixed income securities. It offers a dollar-weighted average maturity of zero to two years.
Under normal circumstances, the fund will invest at least 80% of its assets in fixed income securities. The fund is designed to give investors low-cost exposure to money market instruments and short-term high-quality bonds, including asset-backed, government, and investment-grade corporate securities.
Another fund worth looking at is the Vanguard Short-Term Treasury ETF (VGSH). This ETF offers exposure to short-term government bonds, focusing on Treasury bonds that mature in one to three years.
Overall, VGSH:
- Seeks to provide current income with modest price fluctuation.
- Invests primarily in high-quality (investment-grade) U.S. Treasury bonds.
- Maintains a dollar-weighted average maturity of one to three years.
For more news, information, and strategy, visit the Fixed Income Channel.