When Will Inflation Decrease? Why an Inflation ETF Can Help Now

The inflation story has been one of the defining narratives for U.S. markets in recent years. Though the Fed has put in a lot of effort trying to tame it, the challenge has grown potentially even more complex. Tariff impacts are still unfurling for the broader economy, potentially pushing prices higher. What’s more, the Fed’s dual obligation of economic support and taming inflation saw the bank cut rates last month, potentially reinflating prices. An inflation ETF, then, could intrigue as a contrarian play, offering exposure to inflation-sensitive firms.

See more: Rate Cut Looming? This Active Income ETF Can Step Up

FCPI, the Fidelity Stocks for Inflation ETF, can appeal as a candidate to fill that role. The fund charges a 16 basis point (bps) fee to track the Fidelity Stocks for Inflation Factor Index. The inflation ETF includes large and midcap stocks. That index and its operators look for companies with attractive valuations, high quality profiles, and positive price momentum. The fund emphasizes companies in inflation-sensitive areas that could be poised to benefit from stubborn inflation.

That approach has helped the fund return 17.4% YTD, per ETF Database data. That has helped the strategy outperform both its ETF Database Category and Factset Segment averages in that time frame. That has outperformed the S&P 500 in that time.

The inflation ETF has provided that performance through a few notable investment approaches. While it does share an investment in some key names like Nvidia (NVDA) and Apple (AAPL), it also invests in some other intriguing areas.

For example, the mining company Newmont Corp. (NEWM) has been red hot this year in terms of performance. NEWM has returned 136% per YCharts, with its gold exposure a helpful factor. Other materials names like CF Industries (CF), this time focused on agricultural materials like fertilizer, and midstream companies like CNX Resources Corp. (CNX), also appear in the fund.

Together, its approach could make it an intriguing defensive play for those concerned that inflation may stick around for longer. Tariff impacts may still be unfurling, potentially making inflation even more stubborn. Looking ahead, FCPI may be one to watch.

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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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