Like the perfect red wine to an Italian dish, the federal government’s stimulus package paired nicely with the U.S. Federal Reserve choosing to backstop corporate bonds. The move saw some confidence reemerge in the capital markets, but famed value investor Warren Buffett might have something to say about that.
The “Oracle of Omaha” said extreme consequences could emerge as the Federal Reserve is also looking to add high yield assets as part of its quantitative easing program. The uncertainty of the move is what troubles Buffett—it was almost a necessary evil.
“We’re doing things that we really don’t know the ultimate outcome to,” said Buffett. “I think in general they’re the right thing, but I don’t think they’re without consequences, and I think they could be of extreme consequences if pushed far enough. But there would be kind of extreme consequences if we didn’t do it as well.”
Buffett was effusive in his praise for Fed Chair Jerome Powell, saying that companies owe him much gratitude for allowing the central bank to extend loans to large and small businesses alike.
“Jay Powell, in my view, and the Fed board belong up there on a pedestal,” Buffett said. “They acted in the middle of March probably somewhat instructed by what they’d seen in 2008 and ’09. They reacted in a huge way and essentially allowed what’s happened since that time to play out the way it has.”
With the Federal Reserve stepping in to purchase corporate bonds to help keep the economy afloat, one ETF to consider is the Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
For a high yield option to squeeze out that extra yield albeit more risk, take a look at the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB). GHYB seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Goldman Sachs High Yield Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
For more market trends, visit ETF Trends.
