Close Menu
Fund Focus News
    Facebook X (Twitter) Instagram
    Trending
    • Why Some Firms Are Finally Exploring ETFs
    • National Investments crée National Investments Company (DIFC) Limited aux Émirats arabes unis
    • Why you should go for Specialised Investment Funds- The Week
    • How Our Favorite ETFs Are Performing Amid Market Volatility
    • THIS oldest ICICI mutual fund turned Rs 10K SIP into nearly Rs 10 crore; Rs 1 lakh lump sum investment grew 79 times – Money News
    • Mutual Funds’ anchor investment in IPOs triples to ₹21,583 crore
    • Should you invest in mutual funds to create corpus for your child’s higher education?
    • Thematic and sectoral funds take the crown in equity MF high table 
    Facebook X (Twitter) Instagram
    Fund Focus News
    • Home
    • Bonds
    • ETFs
    • Funds
    • Investments
    • Mutual Funds
    • Property Investments
    • SIP
    Fund Focus News
    Home»ETFs»What These ETFs Say About Inflation
    ETFs

    What These ETFs Say About Inflation

    October 30, 2024


    Most investors fail to adopt a hybrid attitude toward the stock market. This means some place too much weight on the fundamentals regardless of price action and charts. In contrast, others swear by technical analysis without considering the big-picture fundamentals. The best on Wall Street managed to make both of these disciplines a priority for their success.

    Today, there is one way retail investors can learn to emulate these processes: through a simple example in the bond market and its relative price action to the rest of stocks and other asset classes. More specifically, investors should keep in mind how this price action reflects the current fundamental image of the economy, recently swept by excitement from the Federal Reserve (the Fed) cutting interest rates.

    Price action in bonds like the iShares 7-10 Year Treasury Bond ETF NASDAQ: IEF and the iShares 1-3 Year Treasury Bond ETF NASDAQ: SHY will show investors that fears of inflation are taking over the market. This trend is amplified when the performance of the iShares Russell 2000 ETF NYSEARCA: IWM and the iShares S&P 500 Growth ETF NYSEARCA: IVW is checked.

    How Yield Curve Steepening Impacts Inflation & Top Trades to Consider Now

    The yield curve, which is made up of the ten-year bond yields minus the two-year bond yields, typically measures the economy’s liquidity cycle. All investors need to know is that the curve has been negative for 23 months, meaning a heavy leveraging cycle for the U.S.

    iShares 7-10 Year Treasury Bond ETF Today

    iShares 7-10 Year Treasury Bond ETF stock logo
    IEFIEF 90-day performance

    iShares 7-10 Year Treasury Bond ETF

    $94.99

    +0.28 (+0.30%)

    (As of 09:39 AM ET)

    52-Week Range
    $89.56

    ▼

    $99.18

    Dividend Yield
    3.61%

    Assets Under Management
    $33.63 billion

    Now that the Fed is decreasing its balance sheet and starting to work toward deleveraging the economy, the curve is going up. The consequences will be seen through inflation pressures, and that’s where these bond ETFs come into play for investors to consider.

    By default, if the curve steepens, ten-year yields will rise faster than two-year yields, and investors can profit from this trend through the right ETF exposure. This exposure is made up by buying the short-term bond ETF while selling (or avoiding altogether) the long-term bond ETF.

    This way, as long as the Fed keeps on its current path, which is likely, relatively low-risk profits will be made during the cycle. With bonds aside, investors now need to consider what inflation might mean for different stocks and how their portfolios can be secured against it.

    Top Sectors to Watch If Inflation Resurges: Where to Focus Investments Now

    The Russell 2000 ETF has underperformed the growth ETF by over 10% during the past quarter, and there’s a reason the market is compressing small-cap stocks against growth stocks. If inflation does come back around, then small-caps will likely suffer the most, given their domestic exposure to rising costs.

    iShares Russell 2000 ETF Today

    iShares Russell 2000 ETF stock logo
    IWMIWM 90-day performance

    iShares Russell 2000 ETF

    $221.79

    +0.05 (+0.02%)

    (As of 09:40 AM ET)

    52-Week Range
    $162.83

    ▼

    $228.63

    Dividend Yield
    1.16%

    Assets Under Management
    $69.27 billion

    On the other hand, large-cap growth stocks, namely technology stocks, will likely do okay. With enough international exposure and subscription software businesses, companies like Spotify Technology NYSE: SPOT, Alphabet Inc. NASDAQ: GOOGL, and even Meta Platforms Inc. (NASDAQ: META) could see a so-called “melt-up” in their stock prices.

    This belief can be verified by checking in with Wall Street analysts, starting with those at Jefferies Financial Group boosting their Meta Platforms stock price targets to a high of $675 today. To prove these targets right, the company must deliver a rally of up to 15% from today’s price.

    Then there’s the recent boost for Alphabet stock from Truist Financial analysts, who now see the stock going as high as $220 a share, or 30.4% from where it trades today. Probably the most aggressive boost in ratings came from Spotify stock, as KeyCorp analysts reiterated their “Overweight” rating and a $490 price target for a net rally of 25.5%.

    On the other hand, some of the top holdings in the Russell 2000 ETF, such as Sprouts Farmers Market Inc. NASDAQ: SFM, have a consensus price target of only $104.4 a share, which calls for a potential 12.8% downside from today’s stock price.

    That goes to show that even good and well-managed businesses could see some downside in the coming quarters as the yield curve steepens and inflation makes a potential comeback. Instead of taking the market price action’s word for it, investors can check what some of Wall Street’s best are saying.

    Stanley Druckenmiller and Paul Tudor Jones both publicly stated that they are looking to go short the bond market and now recommend buying commodities across the board. This is a textbook example of a view that aligns with higher inflation expectations.

    Before you consider iShares Russell 2000 ETF, you’ll want to hear this.

    MarketBeat keeps track of Wall Street’s top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on… and iShares Russell 2000 ETF wasn’t on the list.

    While iShares Russell 2000 ETF currently has a “hold” rating among analysts, top-rated analysts believe these five stocks are better buys.

    View The Five Stocks Here

    The 10 Best AI Stocks to Own in 2024 Cover

    Wondering where to start (or end) with AI stocks? These 10 simple stocks can help investors build long-term wealth as artificial intelligence continues to grow into the future.

    Get This Free Report

    Like this article? Share it with a colleague.

    Link copied to clipboard.





    Source link

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Telegram Email

    Related Posts

    How Our Favorite ETFs Are Performing Amid Market Volatility

    June 15, 2025

    Quel sont les pièges à éviter ?

    June 13, 2025

    The future of ETFs in APAC | Insights

    June 13, 2025
    Leave A Reply Cancel Reply

    Top Posts

    Why Some Firms Are Finally Exploring ETFs

    June 15, 2025

    Qu’est-ce qu’un green bond ?

    December 7, 2017

    les cat’ bonds deviennent incontournables

    September 5, 2018

    Quel est le rôle du service des impôts des particuliers (SIP) ?

    May 7, 2020
    Don't Miss
    Mutual Funds

    Why Some Firms Are Finally Exploring ETFs

    June 15, 2025

    There are some late bloomers in the world of ETFs. While some of the big…

    National Investments crée National Investments Company (DIFC) Limited aux Émirats arabes unis

    June 15, 2025

    Why you should go for Specialised Investment Funds- The Week

    June 15, 2025

    How Our Favorite ETFs Are Performing Amid Market Volatility

    June 15, 2025
    Stay In Touch
    • Facebook
    • Twitter
    • Pinterest
    • Instagram
    • YouTube
    • Vimeo
    EDITOR'S PICK

    Sensex up nearly 900 points in March so far. How should mutual fund investors tweak their portfolios?

    March 11, 2025

    Be careful with stocks and bonds as dollar could bounce here: BTIG By Investing.com

    August 26, 2024

    Missed Out on Nvidia? This Spectacular ETF May Be a Better Buy Anyway

    July 28, 2024
    Our Picks

    Why Some Firms Are Finally Exploring ETFs

    June 15, 2025

    National Investments crée National Investments Company (DIFC) Limited aux Émirats arabes unis

    June 15, 2025

    Why you should go for Specialised Investment Funds- The Week

    June 15, 2025
    Most Popular

    ₹10,000 monthly SIP in this debt mutual fund has grown to over ₹70 lakh in 23 years

    June 13, 2025

    ₹1 lakh investment in these 2 ELSS mutual funds at launch would have grown to over ₹5 lakh. Check details

    April 25, 2025

    ZIG, BUZZ, NANC, and KRUZ

    October 11, 2024
    © 2025 Fund Focus News
    • Get In Touch
    • Privacy Policy
    • Terms and Conditions

    Type above and press Enter to search. Press Esc to cancel.