2 Inflation-Protection ETFs Climb to Yearly Highs: Here's Why

The OECD downgraded its U.S. growth forecast to 1.6% in 2025 and 1.5% next year, citing the impact of new tariffs which have driven the effective tariff rate up to 15.4% from 2% last year. As a result, the OECD projects U.S. inflation to spike to 3.9% by year-end, contrasting with a decrease in the global inflation outlook, and highlighting downside risks for the U.S. economy. In light of this forecast, the VanEck Real Assets ETF and the Astoria Real Assets ETF, both offering inflation protection, have reached 52-week highs.

Analysis

The Organization for Economic Co-operation and Development (OECD) on June 3, 2025, significantly downgraded its U.S. economic growth forecasts, projecting a slowdown to 1.6% in 2025 and 1.5% in the subsequent year, a stark reduction from the 2.8% growth recorded in the prior year. This revision is primarily attributed to the impact of new tariffs, which have elevated the effective U.S. tariff rate to 15.4% from 2% in the previous year, marking its highest level since 1938. Consequently, the OECD anticipates U.S. inflation will spike in mid-2025, potentially reaching 3.9% by year-end, a substantial increase from the 2.3% Consumer Price Index rise in April 2025 (recorded before the full impact of new tariffs) and a notable upward revision from the OECD's earlier U.S. inflation projection of 2.8% (now 3.2%). This contrasts with the G20 countries, where inflation is expected to ease to 3.6%. The OECD warns that these tariffs, typically paid by U.S. importers like Walmart (WMT), will likely be passed on to consumers, exacerbating inflationary pressures and posing downside risks such as a sharper-than-expected economic slowdown and potential financial market corrections. Reflecting these concerns, two inflation-protection ETFs have reached 52-week highs: the VanEck Real Assets ETF (RAAX), which allocates 44.90% to resource assets and charges 75 bps, and the actively managed Astoria Real Assets ETF (PPI), with significant holdings in U.S. assets (69%) including Oil and Gas (20.8%), charging 78 bps.

Key Decisions for Investors

• Given the OECD's forecast of decelerating U.S. growth and accelerating inflation driven by tariffs, investors should consider strategies to mitigate inflation risk and reassess exposure to sectors sensitive to trade policy changes.
• Inflation-focused ETFs, such as the VanEck Real Assets ETF (RAAX) and the Astoria Real Assets ETF (PPI), which have demonstrated recent strength, may warrant consideration for portfolio diversification, though their expense ratios and specific holdings should be carefully evaluated.
• Closely monitor companies with significant import operations, exemplified by Walmart (WMT), as they may face margin pressures from tariffs or attempt to pass on costs, potentially impacting their profitability and stock performance.
• Maintain vigilance on evolving U.S. trade policies and their direct impact on inflation metrics and economic growth, as these factors will likely be critical drivers of market volatility and investment outlook.