Given all the ongoing uncertainty over the trajectory of both inflation and the Federal Reserve’s rate-cutting regimen, advisors and investors were keen to see what the latest CPI report brought in.
February’s CPI report came out on Wednesday, March 11, showing that the index grew from 0.3% from last month’s numbers and 2.4% from a year prior. Crucially, this report came in closely aligned with analyst expectations.
See More: Consumer Price Index: Inflation at 2.4% in February, as Expected
However, it’s important to note that the data in this report comes from before conflict rapidly escalated in Iran and the Middle East. Among other ripple effects, this conflict has sent oil prices jumping higher and higher.
All in all, advisors and investors should not expect the threat of inflation to abate any time soon. Not only are price pressures remaining as sticky as always, but rising geopolitical tensions are now causing sectors like the oil industry to see skyrocketing prices.
Real Asset ETFs: Ready to Meet the Moment
These conditions could make it a good time to consider adding real asset ETFs to one’s portfolio. For the uninitiated, real asset ETFs look to hold—as one may expect —tangible assets that can work as a potential hedge against inflation.
For instance, take a look under the hood of the State Street Multi-Asset Real Return ETF (RLY ). RLY is an actively managed fund from State Street that looks to provide a blend of capital appreciation and income through its diversified portfolio of real assets.
The fund’s management team invests in a wide mix of different real assets, including real estate securities, commodities, infrastructure companies, inflation protected securities, and more. This diversified approach allows the fund to access multiple avenues for navigating the risk of inflation, without needing to overcommit to one particular asset.
Alternatively, the VanEck Inflation Allocation ETF (RAAX ) could also provide a compelling case for those seeking real asset exposure. RAAX’s philosophy is to provide total return while minimizing downside risk during instances of sustained market drawdowns.
Much like RLY, RAAX also looks to invest in a set of different real assets by allocating to different exchange-traded products. This includes exposure to REITs, commodities, MLPs, gold, and income assets, among others.
Looking ahead, the latest CPI report, when combined with new geopolitical risk factors, are supporting the case for battening down the hatch when it comes to inflation. Better yet, diversified real asset ETFs are showing that you can play defense while still putting up compelling performance.
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