U.S. Markets closed

6 Sector ETFs & Stocks to Watch on December U.S. Inflation

Sanghamitra Saha

Annual inflation rate in the United States rose to 2.3% in December 2019 from 2.1% in the previous month and in line with the market expectations. This marked the highest rate since October 2018. The core inflation rate, which excludes items like food and energy, was the same at 2.3%, matching market expectations. Consumer price inflation increased 2.3% in 2019, marking the highest rise in eight years, after a 1.9% uptick in 2018.

Below we highlight a few areas and their related ETFs that may gain from this inflation report.

Medical Care Commodities

Medical care commodities saw a price gain of 1.5% in December on an annual basis after a gain of 0.1% in November. This calls for a look at this healthcare ETF.

iShares U.S. Medical Devices ETF IHI – The underlying Dow Jones U.S. Select Medical Equipment Index measures the performance of the medical equipment sector of the U.S. equity market.

Hologic Inc. HOLX – It develops, manufactures, and supplies diagnostics, medical imaging systems and surgical products which cater to the healthcare needs of women. The stock has a Zacks Rank #2 (Buy).

Medical Care Services

Medical care services logged 0.4% price gains in December, same as November.

iShares U.S. Healthcare Providers ETF IHF – The underlying Dow Jones U.S. Select HealthCare Providers Index of the fund measures the performance of health care providers’ sub-sector of the U.S. equity market. It includes health maintenance organizations, hospitals, clinics, dentists, opticians, nursing homes plus rehabilitation & retirement centers.

Tenet Healthcare Corporation THC – This is an investor-owned health care services company, which owns and operates general hospitals and related health care facilities for urban and rural communities in numerous states. The stock has a Zacks Rank #3.

Energy

The energy sector saw a price gain of 1.4% in December, marking its third successive monthly increase. The gasoline index jumped 2.8% in December following a 1.1% rise in November. This calls for a look at this energy ETF.

United States Gasoline Fund UGA

The United States Gasoline ETF seeks to track in percentage terms the movements of gasoline prices.

Chevron Corporation CVX

Chevron Corporation is one of the largest publicly traded oil and gas companies in the world. The company should benefit from higher gasoline price as it has a considerable number of gas stations in the United States.

Real Estate

Shelter costs were up 0.2% in December after 0.3% gains in November. Investors should note that the domestic economy is on a decent footing with a tightening labor market and higher consumer spending, thus brightening the prospects of the real estate sector. This is because buoyancy in the economy translates into greater demand for real estate, higher occupancy levels and a spurt in rent growth.

iShares U.S. Real Estate ETF IYR – The underlying Dow Jones U.S. Real Estate Index measures the performance of the real estate sector of the U.S. equity market.

Equity Residential EQR – The company is one of the leading, fully integrated, publicly traded multi-family real estate investment trusts (REITs) in the United States. The stock has a Zacks Rank #2.

Apparel

Price of apparel rose 0.4% in December, following 0.1% gain in November.

SPDR S&P Retail ETF XRT  The fund tracks total return performance of the S&P Retail Select Industry Index. Apparel retail makes up about 22.28% share of the fund.

Ross Stores Inc. ROST – The Zacks Rank #2 company operates as an off-price retailer of apparel and home accessories, primarily in the United States.

Consumer Staples

Food inflation was 0.2% in December, slightly up from 0.1% in November, helped by costs of food away from home (0.3%, after gaining 0.2% in November). The index for limited service meals rose 0.4%, while the full-service meals index increased 0.2%. The index for food at home rose 0.1%, the same as November.

Consumer Staples Select Sector SPDR Fund XLP – The underlying Consumer Staples Select Sector Index seeks to provide an effective representation of the consumer staples sector of the S&P 500 Index. With XLP investing 19.67% in food & staples retailing, 17.34% in food products and 25.25% in beverages, rising food inflation should help the fund.