Bank of America has compiled a list of its favorite inflation-protected exchange-traded funds, as it expects U.S. consumer price increases to register 4.6% next year.
The funds are “buy-rated ETFs with above-market dividends and high exposure to inflation-protected sectors,” BofA analysts wrote in a commentary.
The group includes Energy Select Sector SPDR Fund (XLE) - Get Energy Select Sector SPDR Fund Report, iShares Core High Dividend ETF (HDV) - Get iShares Core High Dividend ETF Report, Schwab US Dividend Equity ETF (SCHD) - Get Schwab US Dividend Equity ETF Report, Vanguard High Dividend Yield ETF (VYM) - Get Vanguard High Dividend Yield Index ETF Report, Vanguard Value ETF (VTV) - Get Vanguard Value ETF Report, Vanguard Financials (VFH) - Get Vanguard Financials ETF Report, Real Estate Select Sector SPDR Fund (XLRE) - Get Real Estate Select Sector SPDR Fund Report, SPDR S&P Bank ETF (KBE) - Get SPDR S&P Bank ETF Report, SPDR Portfolio S&P 500 Value ETF (SPYV) - Get SPDR Portfolio S&P 500 Value ETF Report, Schwab Fundamental U.S. Large Company Index ETF (FNDX) - Get Schwab Fundamental US Large Co. Index ETF Report, and Vanguard Small-Cap Value ETF (VBR) - Get Vanguard Small Cap Value ETF Report.
“In 2022, we remain bullish on growth and inflation and our economists have forecasts above the consensus on U.S. GDP, U.S. CPI [consumer price index], gold, and oil,” the analysts said.
They forecast 4% U.S. GDP growth, a $1,925 per ounce average price for gold and an $83 average price per barrel for U.S. WTI oil.
“The central question for markets in 2022 is whether inflation ends the boom,” BofA analysts wrote. “We are seeing price pressures in every part of the economy amid high demand and low supply….
“Given the surplus of cash on household and corporate balance sheets, … demand remains strong.” The latest BAC card data show consumer spending rose 23% over a two-year period for the seven days ending Nov 13.
Meanwhile, “supply is incredibly weak,” with a number of negative factors, the analysts said.