Talks of rising inflation in the United States have been rife since the passage of the $1.9-trillion stimulus bill that included the $1,400-stimulus check under the Biden administration. Widespread vaccination and a prolonged period of a dovish Fed have resulted in super-hot inflation.
So, no wonder, you will be looking out for ways to beat this inflation. JPMorgan CEO Jamie Dimon believes cash is king – at least for the time being so as to beat inflation. JPMorgan Chase has been “effectively stockpiling” cash instead of deploying it to buy Treasuries or other investments because of chances of higher inflation, as
indicated by a CNBC article.
The U.S. bank is basically preparing itself to benefit from rising interest rates, which will let it buy higher-yielding assets, Dimon said,
as quoted on CNBC. “If you look at our balance sheet, we have $500 billion in cash, we’ve actually been effectively stockpiling more and more cash waiting for opportunities to invest at higher rates,” Dimon said.
Though Fed officials believe that the latest uptick in inflation is transitory, research houses including Deutsche Bank and hedge fund billionaires believe the opposite, the CNBC article noted. Producer prices in May
jumped 6.6% on an annual basis, marking the fastest increase on record. Meanwhile, consumer prices rose 5% year over year in May, the fastest pace since August 2008 and higher than Wall Street expectations.
The benchmark U.S. treasury yields rose to 1.51% on Jun 15 versus 0.93% recorded on Jan 4. So, one can expect a further jump in rates if COVID-19 cases decline and economic reopening gathers steam.
Meanwhile, if you are a fan of J.P. Morgan’s Dimon, you can hoard cash or invest in cash-like ETFs. In any case, cash and short-dated fixed income may play a greater role in providing stabilization to a portfolio. Thus, instead of hoarding cash, one can also invest in money-market or ultra-short-term ETFs.
Below we highlight a few money-market ETFs and their performance plus yields.
PIMCO Enhanced Short Maturity Active Exchange-Traded Fund ( MINT Quick Quote MINT - Free Report)
The 30-day SEC yield is 0.23% annually. Its estimated yield to maturity was 0.70% as of Jun 15, 2021. It has gained 0.1% in the past month.
iShares Short Treasury Bond ETF ( SHV Quick Quote SHV - Free Report)
The fund tracks the ICE U.S. Treasury Short Bond Index, which intends to assess U.S. Treasury issued debt. Only U.S. dollar denominated, fixed rate securities with minimum term to maturity greater than one month and less than or equal to one year are included. The fund yields 0.19% annually. The expense ratio of the fund is 0.15%.
iShares Ultra Short-Term Bond ETF ( ICSH Quick Quote ICSH - Free Report)
This ETF is active and does not track a benchmark. Its 30-day SEC yield is 0.26%. It has gained 0.1% past month.
JPMorgan Ultra-Short Income ETF ( JPST Quick Quote JPST - Free Report)
This ETF is active and does not track a benchmark. Its 30-day SEC yield is 0.34%. It has gained 0.03% past month.
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