Investing in exchange traded funds (ETFs) or anything else in times of recession might demand incremental purchasing.
Gary Gordon for ETF Expert says that the strongest risk-reward relationship rests with the return of capital plus the opportunistic yields/interest/coupons/dividends of 8%-10%. Preferred share ETFs and investment grade bond ETFs may provide safe harboring with annual yields that stock investors desire.
The important thing to keep in mind is that the recession will impact corporate earnings and consumer spending more than anticipated. The highest-rated companies with the highest quality debt may not be going out of business completely, so they may represent opportunity for those seeking ETFs as a safer harbor right now.
Gordon reminds us that an “all-in” mindset based on a likely bottom at Dow 7800 doesn’t mean that one should try to win big with capital appreciation alone.
The iShares S&P U.S. Preferred Stock Index (PFF) is down 28.8% year-to-date.
The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.