Is inflation really beaten? The recent June CPI print would suggest that it may be more persistent than anticipated. The real question then becomes whether markets and investors are paying attention. With a number of underlying factors still driving inflation forward, an inflation ETF could make a strong addition to many portfolios. FCPI, for example, could offer a useful tool to investors’ toolkits.
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What kind of factors are contributing to stubborn inflation and, in turn, higher rates? Tariffs, of course, come to mind straight away. Not only do individual consumers face higher costs, but companies, too, see steeper input prices as well. While the ability to charge more helps, not all firms benefit, and nearly all face higher up front prices.
Other factors are driving those costs, as well. A weaker U.S. dollar plays a role, but so, too, do geopolitical risks to energy costs. Furthermore, the new tax regime could add more money to the economy as less is taken out by government duties. Together, those elements may have contributed to the 2.7% annualized inflation rate per the Consumer Price Index (CPI).
Inflation ETF FCPI’s Case
The Fidelity Stocks for Inflation ETF (FCPI ) could provide a solution therein. The inflation ETF charges a 16 basis point (bps) fee to track the Fidelity Stocks for Inflation Factor Index. FCPI largely emphasizes sectors and industries best positioned for inflation. It does this by tilting the portfolio to companies that are aligned to three key inflation pillars: commodities, pricing power, and real assets/ infrastructure. That includes segments like energy and consumer staples, as well.
Together, that has helped FCPI return 16.27% over one year, according to Fidelity Investments data. Looking longer term, the fund has returned 19% over the last three years. With many investors heavily allocated to key tech names, and concentration risk a problem, having an option like FCPI can help. Inflation may be around for a while, and FCPI could provide a boost.
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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