While inflation has slowed in recent months, it is still far from the Fed’s target level, and further rate hikes should be ahead. Hence, we advise investors to stock up on incredible ETFs, Vanguard Short-Term Bond (BSV), JPMorgan Ultra-Short Income (JPST), and SPDR Series Trust SPDR Portfolio S&P 500 Value (SPYV) which are trading under $100. These ETFs could help ensure steady returns. Read more.
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While the Consumer Price Index fell 0.1% in December, headline CPI rose 6.5% from a year ago, highlighting the persistent burden of rising prices in the US. The current inflation rate is far away from the Fed’s 2% target.
The Federal Reserve raised interest rates seven times last year as it battles the multi-decade high inflation, taking the target rate into a range between 4.25% and 4.5%, the highest level in 15 years. The Fed expects anemic economic growth next year of just 0.5% and predicts that unemployment will hit 4.6%, up from its current rate of 3.7%.
Furthermore, money markets are pricing a rate peak around 4.9%, followed by nearly half a percentage point of rate cuts by the end of 2023. However, Fed officials have been saying rates are heading above 5% and will stay there all year. Atlanta Fed President Raphael Bostic said the central bank should raise interest rates above 5% by early in the second quarter and then go on hold for “a long time.”
As macroeconomic uncertainties remain, it could be wise to invest in ETFs with exposure to industries or asset classes that usually remain relatively unaffected by economic weakness.
Therefore, we advise our investors to scoop up on incredible ETFs, Vanguard Short-Term Bond ETF (BSV), JPMorgan Ultra-Short Income ETF (JPST), and SPDR Series Trust SPDR Portfolio S&P 500 Value ETF (SPYV), which are currently trading under $100.
Vanguard Short-Term Bond ETF (BSV)
BSV is a fixed-income ETF launched and managed by The Vanguard Group, Inc. It offers exposure to investment-grade, dollar-denominated debt issued in the US with maturities between one and five years.
BSV’s holding primarily consists of United States Treasury Notes of varying maturities. The fund’s expense ratio is 0.04%, lower than the category average of 0.41%. It has $38.18 billion in AUM and 2625 total holdings.
BSV pays $1.13 annually as dividends, translating to a yield of 1.48% at the current price. It saw a net inflow of $279.65 million over the past month.
BSV has gained 1.7% over the past month to close the last trading session at $75.57. The fund’s NAV is $75.99 as of January 13, 2023.
BSV’s POWR Ratings reflect its promising prospects. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has a grade A for Trade and Buy & Hold. BSV tops the list of 33 funds in the A-rated Ultra-Short Term Bonds category.
Click here to see all ratings for BSV.
JPMorgan Ultra-Short Income ETF (JPST)
JPST is an actively managed, ultra-short-term, broad-market bond fund that aims to maximize income and preserve capital. 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.
JPST has $24.16 billion in assets under management. The fund has a total of 452 holdings that include the U.S. Dollar with a 52.23% weighting, United States Treasury Notes 0.375% 15-JUL-2024 with 2.04%, Fixed income (unclassified) at 0.96%, and BNP Paribas S.A. 3.5% 01-MAR-2023 with 0.87% weighting in the fund.
JPST has an expense ratio of 0.18%, lower than the category average of 0.61%. Its fund inflows came in at $4.45 billion over the past six months and $5.79 billion over the past year. It has a NAV of $50.22 as of January 13, 2023.
The ETF pays an annual dividend of $1.49, which yields 2.97% on the current price. Its dividend payouts have increased at a CAGR of 25.6% over the past five years.
Over the past six months, JPST has gained 1.2% to close the last trading session at $50.21. Also, it has a beta of 0.08, indicating low volatility compared to the broader market.
JPST’s robustness is reflected in its POWR Ratings. It has an overall A rating which equates to Strong Buy in our proprietary rating system.
The fund has an A grade for Trade, Buy & Hold, and Peer. It is ranked #3 in the Ultra-Short Term Bonds group.
Click here to access JPST’s POWR Ratings.
SPDR Series Trust SPDR Portfolio S&P 500 Value ETF (SPYV)
SPYV is linked to the S&P 500 Value Index, which offers exposure to large-cap companies that show value characteristics within the U.S. equity market. Companies within this fund are often considered some of the safest firms in the world and tend to be in more stable industries as well.
The fund has approximately $16.11 billion AUM. Among the 408 holdings, Microsoft Corporation (MSFT) is the top holding of SPYV, with a 4.6% weighting, followed by Berkshire Hathaway Inc. Class B (BRK.B) and Amazon.com, Inc.(AMZN), with 3.5% and 2.8% weightings, respectively.
SPYV has an expense ratio of 0.04% as compared to the category average ratio of 0.48%. The fund has gained 18.9% over the past three months and 5.8% over the past month, closing the last trading session at $41.13. The ETF is currently trading 4% below its 52-week high of $42.86.
SPYV’s NAV stands at $41.13 as of January 13, 2023. The fund has a 24-month beta of 0.79. Moreover, the ETF pays an annual dividend of $0.86, which yields 2.10% on the current price. Its dividend payouts have increased at a CAGR of 5% over the past five years.
SPYV’s POWR Ratings are consistent with its promising outlook. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It also has an A for Trade, Buy & Hold, and Peer. In the A-rated Large Cap Value ETFs group, it is ranked #9 out of 86 ETFs.
Get all SPYV ratings here.
BSV shares were unchanged in premarket trading Tuesday. Year-to-date, BSV has gained 0.96%, versus a 3.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor’s degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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