Fed's Favorite Inflation Gauge Arrives Thursday: 5 ETFs To Watch

The Bureau of Economic Analysis is set to release the Personal Consumption Expenditure (PCE) index for October, a crucial inflation indicator closely monitored by the Federal Reserve, at 8:30 a.m. ET Thursday.

The PCE index stands out as the Federal Reserve’s preferred gauge of inflation because it offers a more comprehensive assessment of price changes for a broad range of goods and services compared to the popular Consumer Price Index (CPI) basket.

According to the CME Group’s FedWatch tool, investors are currently pricing in a 78% probability of a rate cut by May 2024. Additionally, there is speculation that up to five rate cuts could occur by December 2024, with a 56% probability.

October PCE Report: What Are Economists Expecting?

Economists’ forecasts for the October PCE report are as follows:

• The headline PCE price index is expected to decrease from September’s year-on-year increase of 3.4% to 3% year-on-year in October.
• The headline PCE price index is projected to show a month-over-month increase of 0.1%, a slowdown from the previous month’s 0.4% rise.
• The core PCE price index, which excludes energy and food prices, is forecasted to ease from 3.7% year-on-year to a 3.5% year-on-year increase in October.
• The monthly increase in the core PCE price index is expected to edged down from 0.3% to 0.2%.

5 ETFs to Watch

Thursday will also mark the last trading day of the month, making it an important time to assess the performance of various Exchange-Traded Funds (ETFs). Here are some ETFs to keep an eye on:

• iShares 20+ Year Treasury Bond ETF TLT: This ETF gained 10.8% this month, on track for its strongest monthly performance since September 2011.
  
• Invesco QQQ Trust QQQ: This ETF rose by 11% this month, marking its strongest monthly return since July 2022. It is trading just 4.5% below its all-time highs, indicating strong investor confidence in the tech-heavy index.
  
• SPDR Gold Trust GLD: This ETF saw a 3% increase this month, extending its gains from a 7.4% surge in October. It is on track for a record-high close, reflecting continued interest in gold as a hedge against inflation and economic uncertainty.
  
• Cathie Wood’s ARK Innovation ETF ARKK: ARKK experienced an impressive 33% rise in November, marking its strongest monthly performance since its inception.
  
• Roundhill Magnificent Seven ETF MAGS: Comprising a basket of seven stocks, including tech giants like Apple Inc. AAPL, Microsoft Corp. MSFT, Alphabet Inc. GOOG GOOGL, Amazon.com, Inc. AMZN, Meta Platforms Inc. META, NVIDIA Corp. NVDA and Tesla, Inc. TSLA MAGS has gained 7% this month.

Read More: Cathie Wood’s ARK Innovation ETF Achieves 35% Gain In November, Its Best Month Since Inception

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