--- title: "Hotter PCE Inflation: 5 Defensive ETFs Investors Can Turn to as Rate-Cut Hopes Fade" type: "News" locale: "en" url: "https://longbridge.com/en/news/297065618.md" description: "With U.S. PCE inflation rising to 3.7% in July, exceeding expectations and keeping rate-cut hopes low, investors are turning to defensive ETFs. The article highlights five funds: XLP (Consumer Staples), XLV and VHT (Healthcare), XLU (Utilities), and SPLV (Low Volatility). These sectors offer exposure to businesses with stable demand less dependent on discretionary spending or economic cycles, providing potentially steadier returns amid persistent inflation and higher Treasury yields." datetime: "2026-08-26T15:08:45.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/297065618.md) - [en](https://longbridge.com/en/news/297065618.md) - [zh-HK](https://longbridge.com/zh-HK/news/297065618.md) generator: "portal-rs" --- # Hotter PCE Inflation: 5 Defensive ETFs Investors Can Turn to as Rate-Cut Hopes Fade The latest U.S. inflation reading is giving investors another reason to rethink exposure to economically sensitive and rate-dependent assets. The **Personal Consumption Expenditures (PCE)** price index rose 3.7% year over year in July, topping economists’ 3.6% estimate and remaining well above the Federal Reserve’s 2% target. Core PCE, which excludes food and energy, held at 3.3%, while monthly headline and core PCE both increased 0.2%. The report pushed Treasury yields higher as markets reassessed the path for monetary policy, potentially creating additional headwinds for long-duration bonds and other rate-sensitive assets. That could make defensive equity ETFs worth watching. These funds are not immune to inflation as higher input costs and interest rates can still hurt their holdings, but they provide exposure to businesses whose products and services tend to be less dependent on discretionary spending or a strong economic cycle. ### **Consumer Staples Select Sector SPDR ETF** (NYSE:XLP) **XLP** provides exposure to staples companies selling food, beverages, household products and other necessities. The sector can benefit from relatively stable demand when consumers become more cautious. Names like **Walmart Inc** (NYSE:WMT), **Costco Wholesale Corp** (NASDAQ:COST), and **Procter & Gamble Co** (NYSE:PG) are among its top holdings. ### **Health Care Select Sector SPDR ETF (NYSE:XLV)** **XLV** offers exposure to healthcare companies, including pharmaceuticals, healthcare providers and medical-device businesses. Healthcare demand is generally less cyclical than sectors such as consumer discretionary or industrials, making it a traditional defensive allocation. ### **Utilities Select Sector SPDR ETF (NYSE:XLU)** Utilities provide essential electricity and other services, giving XLU defensive characteristics. However, investors should note that utilities are also capital-intensive and can remain sensitive to interest rates. State Street currently has a neutral view on utilities amid rate volatility. ### **Vanguard Health Care ETF (NYSE:VHT)** For investors wanting broader healthcare exposure, **VHT** holds a wider range of U.S. healthcare companies than XLV. Its diversified exposure can provide a defensive alternative without concentrating entirely on the largest healthcare names. ### **Invesco S&P 500 Low Volatility ETF (NYSE:SPLV)** **SPLV** takes a different approach, selecting the 100 least volatile stocks from the S&P 500. That makes it a potential option for investors seeking to reduce portfolio volatility rather than simply rotate into one defensive sector. ## Note: Defensive Does Not Mean Inflation-Proof. Still, with PCE at 3.7% and Treasury yields climbing, ETFs focused on essential-demand businesses and lower-volatility stocks could offer investors a steadier path as the Fed navigates persistent inflation. **Read Also: Canada-US Tariff War Puts Critical-Mineral ETFs Back in Focus** ### Related Stocks - [VHT.US](https://longbridge.com/en/quote/VHT.US.md) - [XLU.US](https://longbridge.com/en/quote/XLU.US.md) - [XLV.US](https://longbridge.com/en/quote/XLV.US.md) - [SPLV.US](https://longbridge.com/en/quote/SPLV.US.md) - [XLP.US](https://longbridge.com/en/quote/XLP.US.md) - [SZK.US](https://longbridge.com/en/quote/SZK.US.md) - [UGE.US](https://longbridge.com/en/quote/UGE.US.md) - [CURE.US](https://longbridge.com/en/quote/CURE.US.md) - [RXD.US](https://longbridge.com/en/quote/RXD.US.md) - [RXL.US](https://longbridge.com/en/quote/RXL.US.md) - [SDP.US](https://longbridge.com/en/quote/SDP.US.md) - [UPW.US](https://longbridge.com/en/quote/UPW.US.md) - [UTSL.US](https://longbridge.com/en/quote/UTSL.US.md) ## Related News & Research - [BofA Sounds Alarm On Extreme Bullishness. 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