The Federal Reserve raised the benchmark interest rates by 75 basis points yesterday to bring down high inflation levels. The Fed interest rate hikes so far and the potential of further hikes this year could mean a slowing economy, as borrowing costs are rising steadily.
Furthermore, the economy has already met the standard recession definition with two consecutive quarters of negative GDP readings. The economy contracted at a 0.9% annual rate in the second quarter after a 1.6% decline in the first quarter.
Credit Suisse analysts forecasted that the probability of the United States being in recession 6 and 12 months ahead is nearly 25%. “Inverting yield curves, rising inflation, weakening housing data, and slumping surveys have all driven the increase in recession probability,” they wrote in a research note.
ProShares Short High Yield ETF (SJB)
SJB offers daily inverse (-1x) exposure to a modified market-value-weighted index that comprises US-dollar-denominated corporate high-yield bonds with maturities ranging between 3 and 15 years. High-yield bonds, just a euphemism for junk bonds, fall into an asset class that generally delivers high expected returns and features the considerable risk of default.
SJB tracks the iBoxx $ Liquid High Yield Index. It has an expense ratio of 0.95% compared with the category average of 0.98%. The fund has a total of four holdings. Its principal holdings include the U.S. dollar with 34.09% weighting, followed by the United States Treasury Bills 0.0% 22-SEP-2022,11-AUG-2022, and 13-SEP-2022 with 32.92%, 19.81 and 13.18% weighting, respectively.
SJB has $375.70 million in assets under management. Over the past six months and past year, its fund flows came in at $299.92 million and $299.93 million, respectively. It has a beta of negative 0.37.
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The fund has gained 4.3% over the past six months and 7.3% year-to-date to close the last trading session at $18.71. It has a NAV of $18.71.
SJB’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SJB has a grade of A for Buy & Hold and B for Trade and Peer. The fund is ranked #2 among 20 ETFs in the Inverse Bonds ETFs group. To access all POWR Ratings for SJB, click here.
BlackRock Short Maturity Municipal Bond ETF (MEAR)
MEAR holds a portfolio of actively managed municipal bonds. With a target portfolio maturity of three years or less, this ETF is considered a valuable cash management tool for non-tax-advantaged accounts. So, the active manager aims to provide current tax-exempt income through a portfolio of investment-grade, AMT-free, short-term municipal securities.
Given its active approach, MEAR’s exposure can change rapidly. So, investors should…
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