JPMorgan Municipal ETF

JMUB

Market cap $6.19B

Despite the availability of thousands of different exchange-traded funds (ETFs), many investors focus on a relatively small number of popular options. While there is nothing wrong with a broad-based S&P 500 fund or a targeted Nasdaq-100 fund—and indeed these ETFs often provide some of the most robust returns when the broader stock world is thriving—there are opportunities for more adventurous investors to find alternatives that can provide compelling momentum, strong dividends, and value.

The muni bond ETF world shook this morning with news that J.P. Morgan Asset Management (JPMAM) has merged a key muni bond fund into an existing muni bond ETF.

Municipal bonds are back to offer compelling risk-adjusted opportunities, but future decisions from Washington can either act as a tailwind or headwind. Municipal bond funds saw net inflows during 2024, first annual inflow since 2021—which was a record year. 2024 was a record year in municipal bond issuance. With attractive yields, the market may start to pay more attention to tax-equivalent yield advantages offered through municipal debt.

A new year means a new opportunity to refresh portfolios, all the way down to core allocations. For many investors, core allocations means finding a simple, passive fund.

I updated my universe of exchange-traded funds to track based on superior long-term performance. Nearly 450 ETFs are ranked based on short-term monthly returns, exponential moving average, and money flows into funds. With valuations and concentrations high, I select twenty trending ETFs Lipper Categories with less risk of correction in 2025 for further analysis.

Specific to the muni market, perhaps the biggest surprise this year has been new issue supply that is running well ahead of expectations, up roughly 40% from last year. We think this increased summer issuance is likely the result of deals getting pulled forward, as issuers may be cautious about coming to market later in the fall ahead of what is likely to be an uncertain U.S. political climate. While municipal credit quality has already peaked, it is entering this period of moderating economic growth from a position of strength.

Despite Federal Reserve officials putting the kibosh on interest rate cuts in March, U.S. indices hit new record highs during the Lipper fund flows week. The Dow and the S&P 500 posted their ninth and seventh record close of 2024 on Friday, February 2, after stronger-than-expected Q4 tech earnings.