Waiting Out the Stock Market with Preferred, High-Yield ETFs

May 2nd at 11:26am by John Spence

Stock investors have been frustrated with the choppy action in markets the past several weeks as they wait for the next major trend to develop.

Analysts are wondering if a run at the all-time highs from 2007 is in the cards, or if the S&P 500 will succumb to worries over the Eurozone debt crisis and stagnant U.S. job market. Equities are entering the volatile summer period.

Some investors are choosing to stay on the sidelines in the meantime and collect the generous income being offered by high-yield bond ETFs. Funds indexed to preferred stock are another popular option with investors seeking yield.

Despite the recent turbulence in stocks, junk bond ETFs such as iShares iBoxx High Yield Fund (NYSEArca: HYG) and SPDR Barclays High Yield Bond (NYSEArca: JNK) are making new 2012 highs and have held at the 50-day moving average. [High-Yield Bond ETFs Come with Risks]

“In the past, positive price appreciation in the high-yield complex has been a good signal for the broad stock market,” says Chris Kimble at Kimble Charting Solutions.

The iShares S&P U.S. Preferred Stock Index Fund (NYSEArca: PFF) has also survived a recent test of this technical indicator. [ETF Chart of the Day: Preferred Stocks]

HYG and JNK, the junk bond ETFs, are sporting 30-day SEC yields of nearly 7%. PFF, the preferred stock fund, has a yield of 6.5%. [Preferred Stock ETFs: High Yield, Financial Sector Risks]

SPDR Barclays High Yield Bond

iShares S&P U.S. Preferred Stock Index Fund


The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.