LQD: Weighing Up The Pros And Cons

Stuart Allsopp
6.88K Followers

Summary

  • At 4.5%, LQD offers a high yield compared to long-term inflation expectations and U.S. stocks, with a spread over Treasuries that is likely to more than compensate for future defaults.
  • The ETF is likely to perform well during periods of weak economic growth, but a lengthy period of inflation and/or a credit crunch would result in further losses.
  • On balance, I believe the ETF is a buy here, particularly for U.S. focused investors.

Pros and cons concept. Business man with cardboard plus and minus symbol signs.

Tero Vesalainen/iStock via Getty Images

U.S. investment-grade corporate bonds have performed even more poorly than Treasuries during the latest bond market selloff, with rising credit spreads compounding losses. The iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEARCA:LQD) now

This article was written by

6.88K Followers
I am a full-time investor and owner of Icon Economics - a macro research company focussed on providing contrarian investment ideas across FX, Equities, and Fixed Income based on Austrian economic theory. Formerly Head of Financial Markets at Fitch Solutions, I have 15 years of experience investing and analysing Asian and Global markets.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of LQD either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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