IIs the US economy headed for a recession? Many Wall Street analysts and industry veterans seem to think it’s a very real possibility, including former Goldman Sachs CEO Lloyd Blankfein. Speaking with “Confront the Nationon CBS News on Sunday, Blankfein said there was a “very, very high risk” that the US economy was heading into a recession as the Federal Reserve tightens policy to combat high inflation.
“If I was running a big company, I would be very prepared for this,” said Blankfein, who stepped down as CEO in 2018 but is still Goldman’s senior chairman. “If I was a consumer, I would be prepared for it. But it’s not baked in the cake.
Blankfein attributed high inflation to the economic stimulus the government introduced to mitigate the impact of the COVID-19 pandemic, supply chain issues, lockdowns in China and war in Ukraine.
“The Fed has very powerful tools. It’s hard to fine-tune them and it’s hard to see the effects quickly enough to change them,” Blankfein added. “But I think they react well.”
With an economic slowdown a real possibility, institutional bond investors with a long-term view might want to move away from broad-based exposure and consider some defensive sectors. One option to protect against a possible recession could be the BondBloxx US High Yield Consumer Non-Cyclicals Sector ETF (NYSE Arca: XHYD).
The U.S. high-yield bond fund targets the consumer staples sector, including consumer goods, discount stores, food and drug retail, restaurants and utilities sub-sectors . XHYD has an annual expense ratio of 0.35%.
“We’re hearing two things from clients right now. First, they’re considering taking on risk in their fixed income portfolios. Second, they’re worried about a higher likelihood of a recession. Because XHYD offers precise exposure to non-cyclical high yielding industries, this is a choice for investors looking for defensive positioning as we enter the second half of the year,” said JoAnne Bianco, Client Portfolio Manager at BondBloxx.
XHYD is one of seven new US high-yield bond ETFs that BondBloxx Investment Management launched in February. The funds provide precise index exposure to the high yield asset class and allow investors to diversify and manage industrial sector risk.
The funds are passively managed and track rules-based sub-indices of the ICE BofA US Cash Pay High Yield Constrained Index.
BondBloxx was founded by ETF industry leaders Leland Clemons, Joanna Gallegos, Elya Schwartzman, Mark Miller, Brian O’Donnell and Tony Kelly. The team has collectively built and launched over 350 ETFs in companies including BlackRock, JPMorgan, State Street, Northern Trust and HSBC.
For more news, insights and strategy visit the Institutional Income Strategies Channel.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.