Positive Inflation Data Boosts Interest Rate-Sensitive ETFs

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Last week saw the release of positive inflation data on Thursday. According to the latest report from the Bureau of Labor Statistics, the U.S. Consumer Price Index decreased by 0.1% from May. This decline contributed to slowing the annual inflation rate to 3% from May’s 3.3%.

Economic Impact of Inflation Data

The inflation data triggered several market reactions. The U.S. Dollar Index dropped by 0.68% last week. Additionally, yields on the 10-year U.S. Treasury decreased by 9 basis points, from 4.28% to 4.19%. This movement reflects market anticipation of potential rate cuts by the Federal Reserve in September. Fed Funds futures quotes indicate that the market is expecting a total of 125 basis points in rate cuts over the next 12 months.

Sector Performances

Interest rate-sensitive sectors responded favorably to the news. Utilities and real estate emerged among the top-performing S&P sectors this past week, posting gains of 3.90% and 4.37% respectively.

Notable ETF Performances

Several ETFs in these sectors saw notable gains. The iShares S&P/TSX Capped REIT Index ETF (XRE) gained 4.63%, and the BMO Equal Weight Utilities Index ETF (ZUT) increased by 3.80%. These performances highlight the market’s positive response to the prospect of lower interest rates and the overall improved economic outlook.

Here’s a comparison between top Real Estate and Utilities ETFs

Group Data

Index Data

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