Why Investing in Corporate Bonds Can Be Profitable Amidst Rising Interest Rates

When it comes to investing right now, owning corporate bonds could provide some advantages. JPMorgan’s Bryon Lake believes that their Ultra-Short Income ETF (JPST) is an ideal investment for those seeking to make money outside of the stock market’s volatility.

“Some of these corporate bonds have higher quality than U.S. government bonds right now,” he mentioned during an interview with CNBC’s “ETF Edge” this week.

Lake, who is JPMorgan’s global head of ETF Solutions, also views their active management strategy as an advantage of owning JPST.

“We only take on six-month duration, so our position is tight and offers attractive credit quality,” he explained.

According to FactSet, JPST has $23 billion in assets under management and an “A” fund rating. However, it has had minimal gains this year, with its performance being virtually flat.

But things could soon change.

Todd Sohn from Strategas Securities also favors corporate bonds, citing the current monetary policy environment.

“As long as we remain in this higher-for-longer environment, this is like candy – especially after not having it for over a decade during the QE era. It’s like placing a bowl of M&Ms in front of a child and getting that 5%… That’s the analogy I like to use,” said Sohn, who is the managing director and technical strategist at the firm. “The TLT (iShares 20+ Year Treasury Bond ETF) has the same standard deviation as the S&P 500 approximately right now.”

Sohn highlighted that this factor is a key reason why money market funds and short-duration products are appealing.

“It makes sense to focus on duration when the Federal Reserve is finished hiking rates in anticipation of cuts,” Sohn explained. “However, if cuts are not on the horizon, you wouldn’t want that volatility. It’s not enjoyable to endure.”

TLT has seen a decline of nearly 15% year-to-date and a drop of 25% over the past five years.