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Rising rate worries are gripping the whole world, crippling the investing scenario again with uncertainty. Volatility may become the name of the game thanks to a host of factors ranging from rising inflation in the United States and other parts of the developed world, fears of a slowdown in China and the resultant pressure on supply chain and global growth, and geopolitical issues.
Wall Street was off to the worst start to a year in 2022 since 1939. And some analysts believe that more crashes are in the cards as U.S. recessionary fears are rife now. As rising rate worries have been prevalent with the Fed hiking rates faster and fatter this year, the bond investing is also at worse. This happens because, bond prices share an inverse relationship with bond yields. Stocks are also at shambles.
Hence, cash could emerge as a popular asset. Cash is king for investor portfolios right now, according to Morgan Stanley, as quoted on CNBC.
Why Buying Cash-Like ETFs Makes Sense Now
Investors sold their possessions to retain money in the wake of the heightened uncertainty caused by a market crash. The road ahead is a bit unclear. Hence, we believe cash and short-dated fixed income may play a greater role in adding stability to a portfolio.
This is especially true given that the Fed will keep on hiking rates this year and short-term bond yields will rise alongside. That would result in a similar rate for cash-like assets such as money-market funds. As of Aug 23, 2022, yield on three-year U.S. treasury note was 3.35%, higher than the 10-year note (i.e., 3.05%). One -year note yielded 3.29% while two-year note also yielded 3.29%.
Below we highlight a few money-market ETFs and their performance plus yields.
This ETF is active and does not track a benchmark. The JPMorgan Ultra-Short Income ETF seeks to achieve its investment objective by primarily investing in investment grade, U.S. dollar denominated short-term fixed, variable and floating rate debt. The fund charges 18 bps in fees.
This ETF is active and does not track a benchmark. The Arrow Reserve Capital Management ETF seeks to preserve capital while maximizing current income. The fund charges 42 bps in fees.
This ETF is active and does not track a benchmark. The First Trust Low Duration Strategic Focus ETF seeks to generate current income, with a secondary objective of preservation of capital. The fund charges 77 bps in fees.
Columbia Multi-Sector Municipal Income ETF (MUST - Free Report)
The Beta Advantage Multi-Sector Municipal Bond Index reflects a rules-based, multi-sector strategic beta approach to measuring the performance of the U.S tax exempt bond market, which is composed of bonds issued by or on behalf of state or local governments whose interest is exempt from regular federal income tax, with a focus on yield, quality, maturity, liquidity, and interest rate. The fund charges 23 bps in fees.
This ETF is active and does not track a benchmark. The LeaderShares AlphaFactor Tactical Focused ETF seeks to generate long term capital growth. The fund charges 99 bps in fees.
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Time to Buy Cash-Like ETFs?
Rising rate worries are gripping the whole world, crippling the investing scenario again with uncertainty. Volatility may become the name of the game thanks to a host of factors ranging from rising inflation in the United States and other parts of the developed world, fears of a slowdown in China and the resultant pressure on supply chain and global growth, and geopolitical issues.
Wall Street was off to the worst start to a year in 2022 since 1939. And some analysts believe that more crashes are in the cards as U.S. recessionary fears are rife now. As rising rate worries have been prevalent with the Fed hiking rates faster and fatter this year, the bond investing is also at worse. This happens because, bond prices share an inverse relationship with bond yields. Stocks are also at shambles.
Hence, cash could emerge as a popular asset. Cash is king for investor portfolios right now, according to Morgan Stanley, as quoted on CNBC.
Why Buying Cash-Like ETFs Makes Sense Now
Investors sold their possessions to retain money in the wake of the heightened uncertainty caused by a market crash. The road ahead is a bit unclear. Hence, we believe cash and short-dated fixed income may play a greater role in adding stability to a portfolio.
This is especially true given that the Fed will keep on hiking rates this year and short-term bond yields will rise alongside. That would result in a similar rate for cash-like assets such as money-market funds. As of Aug 23, 2022, yield on three-year U.S. treasury note was 3.35%, higher than the 10-year note (i.e., 3.05%). One -year note yielded 3.29% while two-year note also yielded 3.29%.
Below we highlight a few money-market ETFs and their performance plus yields.
ETFs in Focus
JPMorgan Ultra-Short Income ETF (JPST - Free Report)
This ETF is active and does not track a benchmark. The JPMorgan Ultra-Short Income ETF seeks to achieve its investment objective by primarily investing in investment grade, U.S. dollar denominated short-term fixed, variable and floating rate debt. The fund charges 18 bps in fees.
Arrow Reserve Capital Management ETF (ARCM - Free Report)
This ETF is active and does not track a benchmark. The Arrow Reserve Capital Management ETF seeks to preserve capital while maximizing current income. The fund charges 42 bps in fees.
First Trust Low Duration Strategic Focus ETF (LDSF - Free Report)
This ETF is active and does not track a benchmark. The First Trust Low Duration Strategic Focus ETF seeks to generate current income, with a secondary objective of preservation of capital. The fund charges 77 bps in fees.
Columbia Multi-Sector Municipal Income ETF (MUST - Free Report)
The Beta Advantage Multi-Sector Municipal Bond Index reflects a rules-based, multi-sector strategic beta approach to measuring the performance of the U.S tax exempt bond market, which is composed of bonds issued by or on behalf of state or local governments whose interest is exempt from regular federal income tax, with a focus on yield, quality, maturity, liquidity, and interest rate. The fund charges 23 bps in fees.
Leadershares Alphafactor Tactical Focused ETF (LSAT - Free Report)
This ETF is active and does not track a benchmark. The LeaderShares AlphaFactor Tactical Focused ETF seeks to generate long term capital growth. The fund charges 99 bps in fees.