Fed holds rates; advisors eye real-asset ETFs for inflation

The Federal Reserve left the federal funds rate unchanged at its July meeting. Three officials voted against the decision and preferred a rate increase. Inflation pressures driven by higher energy costs and supply-chain bottlenecks remain present, and some advisers are examining real-asset exchange-traded funds for potential inflation exposure.

Policymakers debated the timing of additional tightening during a closely watched meeting. The split vote highlighted differing views within the committee. Market participants are tracking incoming inflation data and other economic indicators for signs of future policy changes.

The State Street Multi-Asset Real Return ETF (RLY) is an actively managed fund of funds that invests in other real-asset ETFs. Its holdings give exposure to commodity strategies, natural-resources equities and global infrastructure positions within a single ticker.

The BNY Mellon Global Infrastructure Income ETF (BKGI) targets infrastructure companies worldwide and includes related sectors such as communication services, real estate and health care. The fund seeks income and total return from companies with contractual or regulated revenue streams that can adjust pricing in response to higher costs.

The Vanguard Real Estate ETF (VNQ) holds U.S. real estate investment trusts that own and operate office buildings, hotels, shopping centers and other property types. The fund provides exposure to rental income and property values across multiple real estate sectors.

Real-asset ETFs can be structured as diversified funds or as sector-specific funds. Diversified funds spread holdings across several real-asset classes, while targeted funds concentrate on one sector. Risks for these funds include sector concentration, sensitivity to interest-rate moves and commodity price volatility. Advisers consider those factors when reviewing client allocations.

With the Fed keeping rates steady in July and inflation pressures continuing, advisers and investors are monitoring economic releases and Fed communications as they evaluate portfolio positioning.