The debate around economic resilience and the direction of inflation and interest rates continues into summer. Fidelity offers an array of ETFs to reflect your portfolio’s position on the path of interest rates looking ahead.
Rising and High-Rate Environment
Should inflation prove persistent and rates rise or remain elevated for longer, investors will likely seek inflation—and rate-sensitive assets. However, Fidelity offers ETFs designed to seek opportunities in a high inflation and rate environment.
The Fidelity Stocks for Inflation ETF (FCPI) offers exposure to industries that generally do well in inflationary environments. The fund seeks to track the Fidelity Stocks for the Inflation Factor Index. The Index includes large- and midcap U.S. companies that demonstrate attractive valuations, high quality, and positive momentum factors while making structure tilts towards inflation-sensitive sectors and industries. FCPI’s top sector was information technology, at 23.33% as of 04/30/24.
Meanwhile, the Fidelity Dividend ETF for Rising Rates (FDRR) offers exposure to companies that pay dividends while also exhibiting positive correlations to Treasury yields. The fund seeks to track the Fidelity Dividend Index for Rising Rates. The Index includes large- and midcap dividend-paying companies. These companies demonstrate strong dividend yields, ongoing dividend growth and stability, and positive correlation to 10-year U.S. Treasury yields.
Receding Rates and Economic Expansion
Several opportunities exist to capture equity exposure as rates and inflation fall and robust economic growth resumes. Whether looking for core or complementary exposures to existing core equity allocations, Fidelity offers a variety of ETFs to seek to capture growth.
The Fidelity Momentum Factor ETF (FDMO) seeks to track the Fidelity U.S. Momentum Factor Index. The Index includes large- and mid-cap companies that demonstrate positive momentum indicators. These include total returns (cumulative and volatility-adjusted), earnings-per-share surprises, and the average short interest in the company.
Fidelity also offers several funds within its actively managed Enhanced ETF suite. The Enhanced strategy uses a research-driven approach to identifying long-term drivers of stock returns, such as growth, profitability, historical valuation, and even non-traditional factors. It seeks to deliver capital appreciation and higher total returns than their respective benchmarks.
Investors seeking large-cap exposure with a growth tilt to capture economic recovery should consider the Fidelity Enhanced Large Cap Growth ETF (FELG). The fund seeks to outperform the Russell 1000 Growth Index.
As economic expansion resumes, investors may want to consider the small-cap space. Small-caps historically demonstrate outperformance over their large-cap peers coming out of recessions and economic drawdowns. The Fidelity Enhanced Small Cap ETF (FESM) offers exposure to small-caps and seeks to outperform the Russell 2000 Index.
For more news, information, and strategy, visit the ETF Investing Channel.
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