With Inflation Surging, Is a Bond ETF the Best Investment Right Now? Here's What History Suggests.
Not all bond ETFs will benefit from higher interest rates.
Overview
The U.S. inflation rate rose 4.2% year-over-year in May, marking its highest rate in three years. The Federal Reserve recently kept its benchmark rate unchanged at 3.50%-3.75%, but many analysts anticipate rate hikes later this year if inflation continues to rise.
By raising interest rates, the Fed aims to temporarily throttle economic growth to reduce inflation to its 2% target. But doing so will make stocks -- which are driven by economic growth and low lending costs -- much less attractive. So is the answer to invest in some bond ETFs instead?
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Originally published at www.fool.com.
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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Data may be delayed up to 15 minutes. Past performance is not indicative of future results. Consult a licensed financial advisor before making investment decisions.