Three S&P 500 ETFs that limit downside as inflation rises
May CPI rose 0.5% and annual inflation hit 4.2% on June 10, prompting interest in S&P 500 ETFs with built-in downside protection: SPLV, BALT and CPSL.
U.S. consumer prices rose 0.5% in May, pushing the annual Consumer Price Index to 4.2%, the highest year-over-year reading in three years. The May CPI report, released June 10, matched analyst expectations and reflected pressure from energy and other components of the inflation basket.
The inflation reading coincided with continued solid earnings from many large-cap companies in the S&P 500. Market participants have shown interest in S&P 500 exchange-traded funds that include explicit downside-management features while keeping equity exposure.
The Invesco S&P 500 Low Volatility ETF (SPLV) tracks the S&P 500 Low Volatility Index, which selects the 100 S&P 500 companies with the lowest realized price volatility over the prior 12 months. SPLV concentrates on lower-volatility names and therefore has a different sector and cash-flow profile than the broader index.
The Innovator Defined Wealth Shield ETF (BALT) uses an outcomes-based structure with three-month outcome periods. The fund seeks returns similar to the SPDR S&P 500 ETF Trust (SPY) up to an upside cap and aims to absorb the first 20% of losses during each three-month interval, according to the fund’s documentation.
The Calamos Laddered S&P 500 Structured Alt Protection ETF (CPSL) holds a portfolio of underlying Calamos structured protection ETFs. Each underlying ETF uses option strategies to cap exposure to the S&P 500. The underlying funds aim to provide full downside protection across a one-year outcome period after fees and expenses, and CPSL staggers those outcome periods across a laddered portfolio, per fund materials.
These three ETFs use different methods to limit downside: SPLV by selecting lower-volatility stocks, BALT by applying a short-term buffered outcome, and CPSL by combining option-based protection across staggered outcome periods. The ETF structure provides intraday liquidity and published holdings, which are part of the product descriptions for these funds.
Investors and advisers weighing inflation’s effect on real returns can consider these rule-based ETF structures while maintaining exposure to the S&P 500. Fund documentation and prospectuses contain details on caps, buffers, fees and outcome-period mechanics for each product.
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