With 2024 just around the corner, the odds of a deep recession hitting the U.S. in 2023 has dropped considerably. Despite high interest rates and persistently high inflation, the U.S. economy remains resilient. Consumer spending remains up while unemployment remains down.
These economic headwinds have made fixed income investment firm BondBloxx expect a soft landing. Or at least, if a recession does hit the U.S., it most likely won’t occur until next year.
See more: “The Current Economy is a Gift to High Yield”
A Deep Recession Is Getting Less Likely
“The likelihood of a deep recession in the U.S. has decreased,” said BondBloxx partner JoAnne Bianco on a VettaFi-hosted webcast. She added that the firm’s position “is supported by resilience that we see across a wide variety of economic indicators.”
“The consumer is strong, still spending,” she added. “Unemployment remains low. The economy seems to be withstanding higher mortgage rates so far. Corporate balance sheets generally remain strong… even if economic conditions were to soften from here.”
And according to BondBloxx, these fundamentals make it a good time for investors to target high yield fixed income.
“High yield issuers entered this year from a position of relative strength,” Bianco noted. “And they remain resilient going into 2024.”
Per BondBloxx, high yield has strong fundamentals with well-positioned balance sheets.
A Suite of Sector-Specific Options
For investors wanting to target high yield bonds in the strong consumer sector, BondBloxx offers the BondBloxx US High Yield Consumer Cyclicals Sector ETF (XHYC) and the BondBloxx US High Yield Consumer Non-Cyclicals Sector ETF (XHYD).
XHYC and XHYD are part of a suite of seven sector-specific high yield bond funds. The fixed income funds offer precise, index-based exposure to the high yield asset class. They’re designed to allow investors to diversify and manage risk within the industry sector.
BondBloxx was launched in October 2021 to develop precision fixed income ETFs. Now, the issuer offers 20 funds that span U.S. Treasuries, high yield bonds, and emerging market bonds. The issuer recently crossed the $2 billion asset mark.
“BondBloxx brought innovation to the high yield bond ETF space with its initial suite of products,” said Todd Rosenbluth, head of research at VettaFi.
For more news, information, and analysis, visit the Institutional Income Strategies Channel.