Bracing For Inflation: Did March CPI Spike? Spotlight On 5 Key ETFs To Navigate The Market

Zinger Key Points
  • The consensus expects CPI inflation to fall from 6% to 5.2%, but with core CPI surging from 5.5% to 5.6%.
  • Major U.S. Equity ETFs and precious metals ETFs are likely to experience some volatility in case of a surprise print.

The publication of the March U.S. inflation rate statistics by the Bureau of Labor Statistics on Wednesday, April 12, is the most anticipated economic event of the week, as investors anxiously await the outcome.  

The consensus from Wall Street economists expects annual CPI inflation to fall from 6% in February to 5.2% in March. The overall CPI index is projected to rise 0.2% month on month, somewhat less than the 0.4% increase reported the previous month. 
However, the underlying measure of inflation, known as core inflation, which excludes energy and food, is predicted to stay relatively sticky, rising 0.4% month on month to 5.6% year-over-year. The core CPI inflation rate was 5.5% in February. 

Read more: Inflation Threat Looms As Economy Shows Slowing Signs: Benzinga's Main Street Monitor

Inflation Previews From Wall Street Economists

A number of sell-side banks have recently released their March CPI forecasts: 

  • Bank of America forecasts headline inflation to rise by 0.4% monthly. As a result, the annual reading will decline from 6% to 5.3%. Core inflation, and core services, however, are expected to remain sticky-high, with monthly core CPI up 0.4% to 5.6%, marginally higher than the prior 5.5%. According to BofA economists, "much of this stickiness stems from elevated rent and owners' equivalent rent inflation." 
  • Goldman Sachs is also broadly in line with the analysts' consensus. Core CPI is expected to rise 0.4% month-on-month to 5.6%, owing to another "hot shelter" reading. Headline CPI is seen 0.1% higher on the month, to 5.1%. 
  • Citigroup highlighted more upside risks for the March inflation reading, citing "continued strength in various non-shelter services." Citi expects core CPI to edge up 0.5% on the month, or 5.7% year-on-year, slightly above consensus. 
  • BNP Paribas also expects inflation to remain high in March, with the core CPI printing 5.7% year-on-year and the headline CPI 5.2% year-on-year. However, the positive news would likely come from a peak in the core services component. 

5 ETFs That Are Likely to See Volatile Price Action Following the CPI Release

  • Invesco QQQ Trust Series 1 QQQ: Tech stocks are particularly sensitive to changes in Fed rate expectations. A higher-than-expected CPI would likely push the Nasdaq 100 index lower, and vice versa, as investors reprice the rate path.
  • SPDR S&P 500 ETF Trust SPY: Also for the broader S&P 500 index, higher-than-expected inflation represents a headwind.
  • iShares 20+ Year Treasury Bond ETF TLT: This ETF, tracking the performance of U.S. Treasury notes with maturities higher than 20 years, will likely face some downside pressure if the CPI beats expectations in March. 
  • SPDR Gold Trust ETF GLD: Gold prices would likely see an increasing volatility if Treasury yields move abruptly following the CPI release.
  • iShares Trust Silver SLV: Also, silver is strongly and inversely linked to long-term Treasury yields, and therefore a stronger inflation surprise will likely hit the metal. 

Read also: Shocks For Stocks: Traders Bet On Another Fed Rate Hike In May After Strong Jobs Data

Photo: Shutterstock

Market News and Data brought to you by Benzinga APIs
Posted In: Analyst ColorLong IdeasMacro Economic EventsNewsBroad U.S. Equity ETFsShort IdeasCommoditiesTreasuriesEconomicsFederal ReserveMarketsAnalyst RatingsTrading IdeasETFsBank of AmericaBNPCitigroupGoldGoldman SachsInflationNASDAQS&P
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!