iShares 1-5 Year Investment Grade Corporate Bond ETF

IGSB

Market cap $22.3B

IGSB offers broader diversification, with almost double the number of holdings as VCSH. Both ETFs deliver similar yields and nearly identical recent returns, but IGSB's expense ratio is just slightly higher.

Sovereign risks are evident and corporate earnings have impressed. However, these are known factors – it's time to look ahead. We remain bearish high yield credit, with the spread between high yield-to-investment grade narrowing toward the -1 sigma boundary. Fundamentals in high yield credit have probably struck an inflection point. Investment grade fundamentals seem better-off. However, credit spreads are exceptionally narrow.

IGSB's current yield reflects its credit risk, and the credit premium is already priced in, so the question is the tactical moment, also with CPI releases coming today. Employment data and labor market pressures are becoming central to the rate cut narrative as inflation looks more reasonable and the growth mandate becomes emphasised. The macro relationship between employment and credit spreads suggests an ambiguous picture despite duration benefit from possibly lower baseline rates.

Advisors don't want to take on much interest rate risk. But many are willing to take on some credit risk.

The equity market's volatility suggests a potential "Breakout" or "Breakdown," with a trade war with China likely causing significant market struggles. I recommend shifting some of your portfolio towards fixed income, particularly the iShares 1-5 Year Investment Grade Corporate Bond ETF, for its defensive characteristics. IGSB offers a low equity beta, low expense ratio, and a yield to maturity of 4.98%, making it ideal for capital preservation during market volatility.

Despite recent Fed rate cuts, a higher interest rate environment persists, making short/intermediate duration corporate credit like iShares 1-5 Year Investment Grade Corporate Bond ETF attractive for yield without excessive interest rate risk. The IGSB ETF offers exposure to U.S. dollar-denominated, investment-grade corporate bonds maturing in 1–5 years, providing a 4.56% yield with reduced interest rate risk. With a low 0.04% expense ratio and a diversified portfolio focused on financial institutions, IGSB stands out among short-term corporate bond ETFs.

Barron's Mid-Year 2024 Pro Picks revealed by panelists for potential investment opportunities. Barron's interviews of eleven financial industry Roundtable-pros tapped 48 predictions. Twelve non-ADR foreign stocks and six funds were dropped by YCharts screens, and six selections paid no dividends, leaving 24 in the final pool. The Barron's list tracked by YCharts as of 7/17/24 projected ten top analyst-estimated net gains from WST, ASML, PBR, RUSHA & topped by SLB ranging 19.46%-35.09%.

VettaFi hosted and moderated 79 webcasts and livecasts in the first half of 2024. Approximately 18,000 advisors joined us to learn from ETF and mutual fund industry experts on a range of equity, fixed income, commodities, and alternatives topics.

The U.S. Federal Reserve plans to slow its quantitative tightening program, indicating a potential interest rate pivot. However, the interest rate environment remains uncertain. The iShares 1-5 Year Investment Grade Corporate Bond ETF has a shorter duration and lower credit quality risk compared to the iShares 5-10 Year Investment Grade Corporate Bond ETF. The market outlook suggests ongoing interest rate uncertainty, making IGSB a more suitable choice for reducing duration.

Barron's First New-Year Roundtable, published 1/11/24, listed 8 stocks of note for 2024. The follow-up article published 1/22/24 mentioned 27 more and included a buy-recommendation from Andrew Bary for BP.