In Uncertain Markets, Consider Hedged Equity

Core inflation numbers are not dropping as much as previously predicted. For the first two months of the year, CPI data has come in a bit hotter than economists expected. This leaves consumer prices still above the Federal Reserve’s ideal 2% benchmark.

There is certainly still time to move the needle, but some analysts are questioning if potential rate cuts could be pushed back to July or beyond. Another key factor in question is the exact number of cuts to expect this year.

“Two months (of higher inflation readings) is too soon to declare that all is lost, but it certainly raises the risk that you have a little bit more of an inflation problem, and in that case it makes sense to be cautious,” Nomura Securities senior U.S. economist Jeremy Schwartz told Reuters. “You have to consider the possibility that it will take a longer period of restrictive policy,” Schwartz added.

With bubbling doubts over the fate of rate cuts, investors seeking safer exposure to large-cap equities could consider the Parametric Hedged Equity ETF (PHEQ B).

PHEQ aims to accrue capital appreciation within a large-cap equity portfolio. The fund uses option overlay hedges in an effort to minimize portfolio loss and reduce volatility. Security against potential market downsides can be ideal during moments of economic uncertainty.

See more: Parametric’s Zweber Talks Active Liquid Alts ETFs

Launched in October 2023, the fund is actively managed and possesses a net expense ratio of 0.29%. Within the last month, PHEQ has witnessed net flows of about $8 million, contributing to a total of $34.2 in assets under management.

PHEQ is up 0.77% over the last month. Across the last three months, the fund has risen about 3.59%. These consistent results help position PHEQ as a potential low-risk option for large-cap exposure.

For more news, information, and analysis, visit The ETF Yield Channel.