Macroeconomic and geopolitical headwinds have significantly affected investor sentiment this year. The multi-decade high inflation has prompted the Fed to adopt a hawkish monetary policy stance.
The Fed’s aggressive rate hikes have started yielding results recently, as inflation showed signs of cooling down in October and November. November’s consumer price index (CPI) rose 0.1% sequentially and 7.1% year-over-year, compared to the estimates of 0.3% and 7.3%, respectively.
The Fed also stuck to its word of slowing the pace of rate hikes, as it raised the benchmark interest rate by 50 basis points recently. The Fed officials have indicated that the rates are expected to be higher through next year with no reductions until 2024. This is expected to fuel speculation of a recession next year.
Given this backdrop, it could be wise to invest in stable ETFs, JPMorgan Ultra-Short Income ETF (JPST), PIMCO Enhanced Short Maturity Active Exchange-Traded Fund (MINT), First Trust Low Duration Opportunities ETF (LMBS), and Invesco Senior Loan ETF (BKLN).
JPMorgan Ultra-Short Income ETF (JPST)
JPST is an actively managed, ultra-short-term, broad-market bond fund that aims to maximize income and preserve capital. The fund makes investments in fixed-rate, variable-rate, and floating-rate debt, including corporate issues, asset-backed securities, and debt pertaining to mortgages, as well as U.S. government and agency debt, including treasury securities.
JPST has $23.39 billion in assets under management. The fund has a total of 468 holdings. Its holdings include the U.S. Dollar with a 50.01% weighting, fixed income (unclassified) at 1.02%, BNP Paribas S.A. 3.5% 01-MAR-2023 at 0.90%, and Nordea Bank AB (New York) FRN 23-DEC-2022 at 0.78%.
JPST has an expense ratio of 0.18%, lower than the category average of 0.60%. JPST’s fund inflows came in at $4.70 billion over the past six months and $4.99 billion over the past year. It currently has a NAV of $50.12. Also, it has a beta of 0.08, indicating extremely low volatility compared to the broader market.
The ETF pays an annual dividend of $1.04, which yields 2.08% on the current price. Its dividend payouts have increased at a CAGR of 16.9% over the past five years. Over the past six months, JPST has gained 0.1% to close the last trading session at $50.14.
JPST’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
JPST has an A for Trade, Buy & Hold, and a B for Peer grade. Of the 32 ETFs in the A-rated Ultra-Short Term Bonds group, it is ranked #3.
Click here to access all of JPST’s POWR Ratings.
PIMCO Enhanced Short Maturity Active Exchange-Traded Fund (MINT)
MINT, launched and managed by Pacific Investment Management Company LLC. The fund invests in U.S. dollar-denominated investment-grade debt securities such as bonds and other similar instruments issued by various U.S. and non-U.S. public or private-sector entities that are rated Baa or higher by Moody’s or equivalently rated by S&P and Fitch. The fund benchmarks the performance of its portfolio against the FTSE 3-month Treasury Bill Index.
MINT has assets under management of $8.97 billion. The fund has a total of 585 holdings. Its top holdings include U.S. Dollar, with a 14.97% weighting, Federal Home Loan Bank System FRN 10-JAN-2023 at 3.70%, and Federal Home Loan Bank System FRN 17-JAN-2023 at 2.76%.
MINT has an expense ratio of 0.36%, lower than the category average of 0.41%. It has a beta of 0.16. It currently has a NAV of $98.89. MINT has gained 0.4% over the past month to close the last trading session at $98.85.
MINT’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
MINT has a grade of A for Trade and Buy & Hold and B for Peer. It is ranked #4 out of 32 ETFs in the same Ultra-Short Term Bonds group. To access all MINT’s POWR Ratings, click here.
First Trust Low Duration Opportunities ETF (LMBS)
Launched and managed by First Trust Advisors L.P., LMBS is an actively managed fund that invests in various mortgage-backed securities with a target duration of fewer than three years. The ETF’s primary objective is to generate current income with a secondary goal of capital appreciation. It benchmarks the performance of its portfolio against the ICE BofA 1-5 Year US Treasury & Agency Index.
The fund has $4.75 billion in assets under management. It has a total of 1285 holdings. The fund’s major holdings include U.S. Dollar with a 4.01% weighting, United States Treasury Notes 1.5% 31-MAR-2023 at 2.55%, and FNMA 30yr Pool#FM3003 4% 01-MAY-2049 with 2.09%.
Over the past five days, LMBS’ fund inflows were 2.37 million. It currently has a NAV of $47.94. Over the past month, it has gained 1.3% to close the last trading session at $47.85. It has a beta of 0.30.
LMBS’ strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Trade, Buy & Hold, and Peer. It is ranked #3 among 49 ETFs in the A-rated Intermediate-Term Bond ETFs group. To access all the POWR Ratings for LMBS, click here.
Invesco Senior Loan ETF (BKLN)
Launched and managed by Invesco Capital Management LLC, BKLN invests in leveraged loans in the high-yield bond space. It is co-managed by INVESCO Senior Secured Management, Inc. It invests entirely in U.S. leveraged loans, giving investors a pure play on the domestic economy. The fund seeks to track the performance of the Morningstar LSTA US Leveraged Loan 100 Index.
With $4.07 billion in assets under management, BKLN’s top holdings include Short Term Investments Trust Government & Agency Portfolio Institutional (AGPXX) with a 15.38% weighting in the fund, followed by Corporate Bond at 3.18%, and Peraton Inc Term Loan B 01-Feb-2028 at 1.67%
It currently has 127 holdings in total. Over the past three months, the ETF’s net inflows were $207.41 million. It has a 0.35 beta. Its current NAV is $20.95.
It is no surprise that BKLN has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system.
In addition, it has an A grade for Trade, Buy & Hold, and Peer. BKLN is ranked #4 out of 58 ETFs in the A-rated High Yield Bond ETFs group. Click here to see all the BKLN ratings.
JPST shares were unchanged in premarket trading Friday. Year-to-date, JPST has gained 0.68%, versus a -17.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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