Published on 13 Jan 2022 on Zacks via Yahoo Finance

5 ETF Plays to Make the Most of Red-Hot Inflation

Prices for almost everything, from raw materials to food prices to shipping costs, soared last year at the fastest pace in nearly four decades. This is especially true as the consumer price index (“CPI”) jumped 7% year over year in 2021, the largest 12-month gain since June 1982. The red-hot inflation has set the stage for the first interest rate hike as soon as in March.Investors could make some profits by investing in ETFs benefiting from rising inflation. These ETFs — Materials Select Sector SPDR XLB, iShares U.S. Home Construction ETF ITB, SPDR S&P Regional Banking ETF KRE, Vanguard Energy ETF VDE and Invesco DB Commodity Index Tracking Fund DBC — from different corners of the space could be compelling choices for investors amid growing inflation.

Behind the Inflation Numbers

The pandemic-related supply shortages and continued strength in consumer demand continued to push the prices higher. The so-called core inflation, which strips out volatile components such as food and energy prices, rose 5.5% year over year last year, marking the biggest growth since February 1991.Energy costs jumped a whopping 29.3% from the year-ago levels, with gasoline soaring 49.6%. Food prices climbed 6.3% - the biggest rise since October 2008, while used car prices — a major component of the inflation increase — spiked more than 37% over the past year (read: 5 Top-Ranked ETFs to Add to Your Portfolio for 2022).The trend is likely to continue in the coming months given surging demand and limited supply. There have been shortages on the supply side of the U.S. economy given lack of commodities, labor shortages and other inputs to produce the totality of all the goods and services demanded by other businesses and American consumers. Additionally, huge infrastructure and stimulus packages in the United States have been viewed as key contributing factors to inflation.