ETF Combinations You Can Choose Amid Uncertainty Over Fed Rate Policy

Investors who worry about higher interest rates do not have to sit on the sidelines: buying a broad stock index ETF in small, regular steps is a simple way to stay invested while the Federal Reserve's next move remains unclear.

Key takeaways

• Pick no more than two ETFs: one U.S. index fund (S&P 500 or Nasdaq-100) and one world stock fund (VT, or VXUS for exposure outside the U.S.).
• Among the low-cost options, SPYM, IVV and VOO perform almost identically for the S&P 500, and QQQM edges out QQQ for the Nasdaq-100. Skip QQEW, which has lagged far behind.
• Buy in stages rather than all at once. Either invest the same amount every month, or add whenever a fund’s price drops 1% over a week.

U.S. stocks are trading under a cloud of rate-hike concerns, and the Fed's recent comments and the latest inflation data have not cleared it. This article walks through the current backdrop and compares the most popular ETFs tracking the S&P 500, the Nasdaq-100 and global stock markets, so you can decide which one or two might fit a long-term plan.

What the Fed and the data are saying

Federal Reserve Chair Kevin Warsh said this week that there is no pressing need to raise rates again in October 2026. In remarks reported by MarketWatch on October 16, 2026, he noted that since the Fed's rate increase on September 16, 2026, "everything is broadly in line with our expectations."

The latest numbers, however, point to more price pressure and a cooling job market:

• Consumer inflation rose to 3.7%, above the 3.6% economists expected and up from 3.4% the previous month.
• Producer prices climbed 6.3%, well above the 5.3% forecast and the prior reading of 5.6%.
• Job growth has slowed.

Markets still expect the Fed to stand pat at its next meeting. According to the CME FedWatch tool, traders see an 85.1% chance that rates will be held steady on October 28, 2026, and that probability has kept rising despite the hotter inflation reports. Looking further out, they put the odds of a 0.25-percentage-point hike at the December 9, 2026 meeting at 77.4%.

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A strategy for uncertain markets: buy in steps

With this much uncertainty, one practical approach is to build a position gradually in ETFs that track broad stock indexes, rather than trying to pick a perfect entry point. The three index families worth a look are the S&P 500, the Nasdaq-100 and the global stock market.

Broad index funds spread your money across many companies, which has historically helped investors recover faster after a downturn. Buying in installments also lets you add more when prices dip, instead of committing everything on a single day.

The idea is to choose one fund from each group you like, then invest on a schedule, such as monthly.

Option 1: S&P 500 ETFs

Four large ETFs track the S&P 500: VOO, IVV, SPY and SPYM. Of these, IVV, VOO and SPYM stand out as the low-cost choices. All figures below are trailing returns and historical yields, and past performance does not guarantee future results.

The three are nearly identical in performance, so the lowest fee is a reasonable tiebreaker. That points to SPYM, though the gap versus IVV and VOO is only one basis point (0.01%) a year.

Because they follow the same index, all four hold the same top 10 stocks: NVDA, AAPL, MSFT, AMZN, GOOGL, AVGO, GOOG, META, MU and TSLA.

Option 2: Nasdaq-100 ETFs

For the Nasdaq-100, there are three unleveraged ETFs to consider: QQQ, QQQM and QQEW. QQQM is the most appealing of the group because it combines the lowest fee with the highest yield.

QQQ and QQQM are very close, and QQQM wins by a small margin. QQEW is a different animal. Because it gives every stock the same weight, it is less concentrated in the largest companies. That has come at a cost: it is more expensive, pays a smaller dividend, and has lagged badly.

• 1 year: QQEW is up 12.83%, versus roughly 20% for QQQ and QQQM.
• 5 years: QQEW is up 39.85%, versus about 97% for QQQ and QQQM.

The top holdings of QQQ and QQQM are the same: NVDA, AAPL, MSFT, MU, AMD, AMZN, META, GOOGL, GOOG and TSLA. QQEW's list looks quite different: AMD, META, MRVL, ALAB, ARM, DDOG, TER, STX, KLAC and MU.

Option 3: Global stock ETFs

Three global ETFs are worth comparing: VT, ACWI and VXUS. They differ mainly in the index they follow:

• VT tracks the FTSE Global All Cap Index.
• ACWI tracks the MSCI All Country World Index.
• VXUS tracks the FTSE Global All Cap ex-US Index, meaning it holds no U.S. stocks.

That difference shows up in what each fund owns. The top 10 holdings of VT and ACWI are nearly identical: NVDA, AAPL, MSFT, AMZN, GOOGL, 2330.TW (Taiwan Semiconductor), AVGO, GOOG, META and MU. VXUS looks nothing like them. Its largest positions are 2330.TW, Samsung (004939.KQ), SK Hynix (000660.KQ), ASML (ASML.AS), Tencent (9700.HK), HSBC (HSBA.I), Roper (ROP.SW), RY, NOVN.SW and Alibaba (9988.HK).

So the real choice is between two approaches:

The bottom line

For long-term investors, we suggest holding no more than two of these ETFs: one U.S. index fund and one world stock fund.

1. Pick one U.S. fund. Choose an S&P 500 ETF or a Nasdaq-100 ETF. Skip QQEW: its equal-weight approach has trailed QQQ and QQQM by a wide margin, and it has not delivered better risk-adjusted returns to make up for it.
2. Pick one world fund. VT covers the whole globe. If you want more exposure outside the U.S., VXUS is the alternative.
3. Buy in stages. Invest gradually instead of all at once. If you want to time your entries, add to a position whenever its price falls 1% over a week. If you would rather keep it simple, invest the same amount every month.

There is no single right answer. What matters most is picking low-cost, diversified funds and sticking with a plan that lets you keep buying when headlines are noisy.