The Fed has its meeting regarding beginning pull-backs on the $120 billion monthly bond purchase program at the beginning of November, a choice that increasingly more investors are concerned about given indicators of broad inflationary pressures in recent months.
Government officials have indicated that they expect supply chain issues, which have caused price increases across broad sectors, to resolve and that inflation-driven prices will fall once the bottlenecks are gone, reports the Wall Street Journal.
This perspective has begun to shift as supply chain woes have only continued. Federal Chairman Jerome Powell expressed frustration last month at a congressional testimony, saying, “supply-side constraints have actually gotten worse in some cases…and now we’re getting upward pressure on energy.” Powell concluded, “The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation.”
Because of the concerns of increased inflation over a longer duration, the Fed is looking to taper faster than January, which was the original goal, and reducing over the course of a year; the current plan is to have phased the stimulus program out by June, reducing bond purchases by $15 billion each month.
A report from the Labor Department last month indicated that price pressures are broadening and core prices that the Fed uses as a gauge that exclude volatile food and energy categories were up 3.6% in August over last year. Meanwhile the prices of goods, such as used cars, that were leveling out over the summer months are once again climbing.
American Century Investments Offers Broad Equity Investment
One way that investors are looking to hedge against inflationary fears is to diversify their exposures; the Avantis U.S. Equity ETF (AVUS ) offers diversification in spades. The fund is actively managed and invests in U.S. companies across all market caps and sectors, offering exposure to a variety of industries.
AVUS is benchmarked to the Russell 3000 Index. It works by overweighting smaller market cap companies, high profitability companies, and value companies, and it underweights or excludes large-cap companies that offer lower returns.
The portfolio managers consider the financials and market data of companies when investing, as well as industry classification, the performance of a security compared to its peers, and the stock’s liquidity, float, and tax considerations.
As of the end of September, sector allocations were information technology at 22%, financials at 17%, consumer discretionary at 15%, healthcare at 12%, and industrials at 11%, with smaller allocations to other sectors.
AVUS has an expense ratio of 0.15%.
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