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Chicago, IL – June 18, 2021 – Zacks.com announces the list of stocks featured on the Analysts Blog. Every day, Zacks Equity Research analysts discuss the latest news and events impacting stocks and financial markets. Stocks featured recently in the blog include: SPDR Bloomberg Barclays Convertible Securities ETF CWB, PIMCO Investment Grade Corporate Bond Index ETF CORP, iShares Floating Rate Bond ETF FLOT, iShares Russell 2000 ETF IWM and SPDR S&P Bank ETF KBE.

Here are highlights from Thursday’s analyst blog:

Fed rate hike in the cards? ETF to buy

As widely expected, the Fed kept interest rates near zero at its last meeting. US interest rates have been as low since March 2020. However, forecasts revealed that 13 members of the Federal Open Market Committee believe the Fed will hike rates in 2023 and the majority expect at least two hikes this year- the, by a CNBC article. Seven of the 18 members see the Fed hike rates as early as 2022.

The Fed has also raised its inflation forecast for the year. The central bank now expects inflation to climb to 3.4% this year, more than its previous forecast of 2.4%. PCE inflation expectations rose to 2.1% for 2022 from 2% forecast in March and to 2.2% for 2022 (from 2.1%).

The Fed improved its forecasts for 2021 GDP growth from 6.5% in March to 7.0% and boosted the 2023 growth forecast from 2.2% to 2.4%. The Fed projected the longer-term growth measure at 1.8%.

Market reaction

The immediate impact was felt on the bond market. The 10-year US Treasury yield rose on June 16, 2021 to 1.57% from the previous day at 1.51%. The 10-year Treasury yield notably started 2021 below 1%.

In this context, investors can bet on the following ETFs for current income and likely capital appreciation.

Convertible links SPDR Bloomberg Barclays Convertible Securities ETF

Convertible bonds are those that can be exchanged if the holder wishes, for a specific number of preferred or common shares if the company’s share price exceeds said conversion price during the term of the bond. The fund earns 2.76% per annum and charges a 20bp fee.

Corporate Bonds – ETF PIMCO Investment Grade Corporate Bond Index

If you really want fixed income exposure, investment grade corporate bonds are ideal now. The ICE BofAML US Corporate Underlying Index is an unmanaged index composed of investment grade fixed rate corporate debt securities issued publicly in the US domestic market with a residual maturity of at least one year up to the final maturity and an outstanding amount of at least $ 250 million. These bonds are highly rated. The fund earns 2.76% per annum and charges a 20bp fee.

IShares Floating Rate Bond ETF

Floating rate notes are investment grade bonds that do not pay a fixed rate to investors but have variable interest rates that are often linked to an underlying index (such as LIBOR) plus a variable spread based on the credit risk of issuers. Since the coupons of these bonds are adjusted periodically, they are less sensitive to a rise in rates compared to traditional bonds (cf. all investment grade corporate bond ETFs here).

Small Cap – iShares Russell 2000 ETF

Investors should note that small cap stocks are likely to do better in a growing economy, as they are more tied to domestic operations. So, with the GDP growth forecast revised upwards, investors have every reason to play the small cap IWM ETF.

Finances – SPDR S&P Bank ETF

If the yield curve steepens, bank stocks could gain. In addition, an improving economy is always beneficial for bank stocks, because they give clues to better financial health of companies and households. This, in turn, results in a lower delinquency rate.

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Past performance is no guarantee of future results. The potential for loss is inherent in any investment. This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold any security. No recommendation or advice is given as to whether an investment is suitable for a particular investor. It should not be assumed that any investment in securities, companies, sectors or markets identified and described was or will be profitable. All information is current as of the date hereof and is subject to change without notice. The views or opinions expressed may not reflect those of the company as a whole. Zacks Investment Research does not engage in investment banking, market making or securities asset management activities. These returns come from hypothetical portfolios composed of stocks with a Zacks rank = 1 that have been rebalanced monthly without any transaction costs. These are not the returns of actual equity portfolios. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for more information on the performance figures displayed in this press release.

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IShares Russell ETF 2000 (IWM): ETF Research Reports

S&P Bank (KBE) SPDR ETF: ETF Research Reports

IShares Floating Rate Bond ETF (FLOT): ETF Research Reports

SPDR Bloomberg Barclays Convertible Securities ETF (CWB): ETF Research Reports

ETF PIMCO Investment Grade Corporate Bond Index (CORP): ETF Research Reports

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Zacks investment research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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