Is Now an Opportune Moment to Invest in Corporate Bonds?

Owning corporate bonds could present advantages in the current financial landscape, according to JPMorgan’s Bryon Lake. He suggests that JPMorgan’s Ultra-Short Income ETF (JPST) offers an attractive option for those seeking to generate income outside the volatile stock market. Lake, who serves as JPMorgan’s global head of ETF Solutions, points out that certain corporate bonds currently possess higher quality than U.S. government bonds. He views the firm’s active management strategy as a key advantage for JPST holders, highlighting that the ETF maintains a duration of only six months, ensuring attractive credit quality. JPST, with $23 billion in assets under management and an “A” fund rating per FactSet, has delivered modest gains, registering nearly flat performance year-to-date.

However, market analysts like Todd Sohn from Strategas Securities see the potential for change and favor corporate bonds, citing the current monetary policy backdrop. Sohn emphasizes the appeal of short-duration products in a prolonged “higher-for-longer” environment, comparing a child’s excitement over a bowl of M&Ms after a long wait. He also notes that the TLT (iShares 20+ Year Treasury Bond ETF) demonstrates a similar standard deviation to the S&P 500 at present. Sohn highlights that the stability provided by money market funds and short-duration products becomes particularly appealing, especially when the Federal Reserve concludes its interest rate hikes in anticipation of potential cuts. This perspective reflects a strategic consideration of avoiding volatility, which may not be conducive to a stable investment experience. Over the past year, the TLT has decreased by nearly 15%, and its performance has dipped by approximately 25% over the past five years.