The stock market witnessed a relief rally on Friday after four straight losing sessions as investor sentiment was buoyed by better-than-expected retail sales data and strong earnings reported by Citigroup (C). The S&P 500 surged 1.9%, while the Dow Jones Industrial Average rose roughly 2.2% in the week's last trading session.
However, concerns over the Fed’s upcoming interest rate hikes to control the surging inflation, which reached 9.1% last month, above the 8.8% Dow Jones estimate, and the consequent increase in the odds of the economy tipping into a recession are expected to keep the stock market under pressure in the near term.
Since policymakers pushed back against a bigger raise than last month, the central bank could raise rates by 75 basis points for the second straight month. Roubini, the CEO of economic consultancy Roubini Macro Associates, said, “My baseline would be one of a recession by the end of this year.”
Given this backdrop, it could be wise to invest in WisdomTree Floating Rate Treasury Fund (USFR), JPMorgan Ultra-Short Municipal Income ETF (JMST), and ProShares Short S&P500 (SH) to diversify your portfolio. These ETFs are well-positioned to mitigate market fluctuations and deliver stable returns significantly.
WisdomTree Floating Rate Treasury Fund (USFR)
USFR selects floating-rate Notes (FRNs) that have a two-year term that have an issue date on or before the index rebalancing date. It provides an extremely low-risk place to park one’s cash with minimal interest-rate sensitivity.
With $7.06 billion in assets under management (AUM), USFR's top holdings include the Government of the United States of America FRN 31-JUL-2023 with a 27.2% weighting; Government of the United States of America FRN 31-OCT-2023 at 25.9%; and Government of the United States of America FRN 31-JAN-2024 at 23.8%.
Over the past month, the ETF's fund flows came in at $1.05 billion. In addition, its 0.15% expense ratio compares favorably to the 0.17% category average.
Closing the last trading session at $50.34, the ETF is currently trading 0.08% lower than its 52-week high of $50.38. USFR's NAV stands at $50.33.
USFR'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.
USFR has an A grade for Trade, Buy & Hold, and Peer. Of the 40 ETFs in the B-rated Government Bonds ETFs group, USFR is ranked #1.
JPMorgan Ultra-Short Municipal Income ETF (JMST)
JMST offers access to municipal bonds that are exempt from federal taxes. The fund’s average maturity target of two years or less is lower than many of its competitors, bringing down interest rate risk and making JMST an option for managing short-term assets. Credit risk is also limited as high-yield debt exposure is capped at 10% of the portfolio.
The fund has approximately $3.42 billion AUM. JPMorgan Institutional Tax-Free Money Market Fund Shs -IM- (JOIXX) is the top holding of VDC, with a 13.07% weighting, followed by MUNICIPAL BONDS and COLT Telecom Group Plc 2.0% 16-DEC-2006, with 3.07% and 2.44% weightings, respectively.
JMST has an expense ratio of 0.18% versus the category average of 0.43%. Over the past month, the ETF's fund flow was $106.19 million. The fund has a five-year monthly beta of 0.09, indicating less volatility than the broader market. The fund has gained 0.28% over the past three months.
Closing the last trading session at $50.59, the ETF is currently trading 0.75% lower than its 52-week high of $50.97. JMST's NAV stands at $50.69.
It is no surprise that JMST has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It also has an A for Trade, Peer, and Buy & Hold grades. In addition, it is currently ranked #3 of 66 ETFs in the A-rated Municipal Bonds ETFs group.
ProShares Short S&P500 (SH)
SH offers inverse exposure to an index comprised of large-cap U.S. equities, making it a potentially attractive option for investors looking to bet against this sector of the U.S. economy.
The fund has a $2.79 billion AUM. Its top holdings are U.S. Dollar, with a 35.68% weighting, United States Treasury Bills 0.0% 29-SEP-2022, with a 12.15% weighting, and the United States Treasury Bills 0.0% 11-AUG-2022, with 10.45%. Over the past month, the ETF's fund flows came in at $9.13 million. SH's 0.90% expense ratio compares to the 1.12% category average.
Closing the last trading session at $16.15, the ETF is currently trading 6.1% below its 52-week high of $17.20. SH's NAV stands at $16.14. The fund has a five-year monthly beta of negative 0.90, indicating a negative correlation with the broader market. The fund has gained 18.6% year-to-date and 16.2% over the past six months.
SH's POWR Ratings are consistent with its promising outlook. The ETF has an overall rating of A, which equates to Strong Buy in our proprietary rating system. It also has an A grade for Trade, Peer, and Buy & Hold. In the B-rated Inverse Equities ETFs group, it is ranked #1 of 50 stocks.
USFR shares were unchanged in after-hours trading Monday. Year-to-date, USFR has gained 0.55%, versus a -18.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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