Why now could be a good moment to invest in corporate bonds
Right now, there may be advantages to buying corporate bonds.
Bryon Lake of JPMorgan believes in his firm’s Ultra-Short Income ETF.
(JPST) is perfect for those seeking to profit outside of the turbulent stock market.
“Some of the corporates have higher quality than the US government [bonds] right now,” he said this week on CNBC’s “ETF Edge.”
Lake, JPMorgan’s global head of ETF Solutions, sees the JPST’s active management strategy as another benefit of holding it.
“We’re only taking on six-month duration, and so we got it nice and tight in there, so you’ve got very attractive credit quality,” he went on to say.
According to FactSet, the JPST has $23 billion in assets under management and a “A” fund grade. However, progress has been slow. Year to date, the fund’s performance has been nearly flat.
However, this might be about to change.
Todd Sohn of Strategas Securities favors corporate bonds as well, given the monetary policy background.
‘This is sweet.’
“This is candy as long as you’re in this higher-for-longer environment — especially after not having it for 10-plus years during the QE [quantitative easing] era.” You may now acquire that 5% by just placing a bowl of M&Ms in front of a toddler… “That’s the analogy I like to use,” said Sohn, managing director and technical strategist at the business. “iShares 20+ Year Treasury Bond ETF (TLT)”
The standard deviation of ) is the same as that of the S&P 500.
According to Sohn, this is a significant reason why money market funds and short-term goods are appealing.
“Duration makes sense when the [Federal Reserve] is done hiking in anticipation of cuts,” Sohn said in a statement. “However, if no cuts are on the way, I don’t think you want that volatility.” It’s not enjoyable to sit in.”