High inflation, the Fed's interest rate hikes to tame it, and geopolitical tensions have led the stock market to experience erratic swings this year. While the August jobs report came in better than expected, it failed to revive investor sentiment.
With inflation remaining high, the Fed is expected to maintain its aggressive rate hikes, increasing the risks of a recession. According to a survey by Allianz Life Insurance Company of North America, 66% of Americans believe a major recession is imminent.
Given the uncertain economic conditions, it could be wise to invest in JPMorgan Ultra-Short Income ETF (JPST), iShares Floating Rate Bond ETF (FLOT), and Fidelity MSCI Utilities Index ETF (FUTY), which are well-positioned to dodge the market volatility and deliver stable returns.
JPMorgan Ultra-Short Income ETF (JPST)
JPST is an actively managed, ultra-short-term, broad-market bond fund that makes use of the sector and macroeconomic research capabilities of JPMorgan. 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.
With $21.63 billion in assets under management, JPST’s top holdings include U.S. Dollar with a 38.9% weighting; Fixed Income (unclassified) at 1.9%; Nordea Bank AB (New York) FRN at 0.85%; and BNP Paribas S.A. 3.5% at 0.85%.
JPST has an expense ratio of 0.18%, lower than the category average of 0.64%. The ETF pays a $0.41 dividend annually, which yields 0.80%. Also, it has a five-year monthly beta of 0.11, indicating extremely low volatility compared to the broader market.
JPST closed yesterday’s trading session at $50.16 and is currently trading just 1.12% below its 52-week high of $50.73. The ETF has seen net inflows of $1.19 billion over the past month. JPST’s NAV stood at $50.13.
JPST’s POWR Ratings reflect this promising outlook. The ETF's overall A rating equates to Strong Buy in our proprietary rating system.
JPST has an A grade for Trade and Buy & Hold. Of the 32 ETFs in the A-rated Ultra-Short Term Bonds group, JPST is ranked #1. To access all of JPST’s grades, click here.
iShares Floating Rate Bond ETF (FLOT)
FLOT provides exposure to floating rate debt, which may be appealing to investors looking to reduce interest rate risk. It follows an index of investment-grade floating-rate corporate bonds with maturities ranging from 0 to 5 years. Most of these bonds pay a variable coupon rate that varies with the 3-month LIBOR.
BlackRock Cash Funds Treasury SL Agency Shares have a 3.11% weighting in the fund as its top holding, followed by Goldman Sachs Group, Inc. at 1%, and Morgan Stanley FRN at 0.96%. FLOT has $9.33 billion in assets under management.
FLOT has an expense ratio of 0.15%, lower than the category average of 0.20%. The ETF has gained 0.44% over the past month. It pays $0.25 in dividends annually, which yields 0.49%.
FLOT is currently trading at $50.36, marginally lower than its 52-week high of $50.84. The fund has witnessed a net inflow of $496.93 million over the past six months. The fund’s NAV stood at $50.28.
It is no surprise that FLOT has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It also has an A grade for Trade and Buy & Hold and a B for Peer. It is currently ranked #4 in the same group. To see more of FLOT’s POWR Ratings, click here.
Fidelity MSCI Utilities Index ETF (FUTY)
FUTY follows an index of utility stocks in the United States, a sector known for its low volatility and high distribution yields. The fund has $2.24 billion in assets under management. Its top holdings include NextEra Inc. (NEE) with a 13.9% weighting; Southern Company (SO) at 6.9%; and Duke Energy Corporation (DUK) with 6.8%. It has 68 holdings in total.
FUTY has an expense ratio of 0.08%, lower than its category average of 0.43%. It has gained 12.2% over the past year and 7.2% over the past six months. The ETF pays a $1.23 dividend annually, which yields 2.9%. Also, it has a five-year monthly beta of 0.56.
FUTY closed yesterday’s trading session at $49.55 and is trading just 1.4% below its 52-week high of $50.25. The ETF has advanced 3.7% over the past month and has seen net inflows of $34 million during this period. FUTY’s NAV stood at $48.08.
FUTY’s POWR Ratings reflect this promising outlook. The ETF has an overall rating of A, which equates to Strong Buy in our proprietary rating system.
FUTY has an A grade for Trade and Buy & Hold. Of the 13 ETFs in the A-rated Utilities ETF group, FUTY is ranked #3. Click here to see more of FUTY’s POWR Ratings.
JPST shares were trading at $50.17 per share on Thursday afternoon, up $0.01 (+0.02%). Year-to-date, JPST has gained 0.07%, versus a -15.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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