Slower growth and signs of persistent inflation caused equities to slide on Thursday while bonds sold off. Investors seeking reliable income with quality equity exposure should consider the actively managed Parametric Equity Premium Income ETF (PAPI ).
Interest rate concerns in the wake of a high personal consumption expenditures price (PCE) index reading prompted a selloff in bonds. PCE rose 3.4% annualized in the first quarter while core PCE (excludes food and energy) rose 3.7%. Core PCE is a preferred measure of inflation for the Fed.
Major equity indexes slid to close the day down on concerns of high inflation and economic slowing. GDP came in well below expectations for the first quarter. When adjusted for inflation and seasonality, GDP measured 1.6% on Dow Jones estimates of 2.4%.
“This was a worst of both worlds report – slower than expected growth, higher than expected inflation,” David Donabedian, CIO of CIBC Private Wealth US told CNBC.
It remains to be seen which direction rates and the economy go. The only certainty for now appears to be uncertainty.
See also: Invest in Equities While Mitigating Volatility With PHEQ
Quality Equity Exposure, Added Options Income
The inability to reliably predict the direction of inflation, rates, and the economy contributed to prolonged and elevated market volatility in the last two years. The Parametric Equity Premium Income ETF (PAPI ) offers investors the dual benefit of active management alongside reliable equity income in challenging market environments.
PAPI seeks consistent monthly income as well as capital appreciation. The strategy does so by investing in an actively managed portfolio of dividend-paying equities chosen from the Russell 3000. It does so by using top-down, systematic analysis to select quality companies.
Companies included demonstrate 12 months of high current income and reduced risk within their sectors. The quality equity portfolio is also diversified across sectors, with sectors equally weighted.
The fund also employs an options strategy that writes short-dated, laddered, out-of-the-money calls on the S&P 500. The laddered calls generate premiums as well as allow for more upside appreciation potential compared to a single call option position.
PAPI generated a distribution yield of 7.99% as of 03/31/2024. Distribution annualizes the most recent distribution and divides it by the fund’s most recent NAV. It’s a forward-looking indicator of what investors could potentially earn in the next year if distributions remained the same.
PAPI carries an expense ratio of 0.29%, making it an affordable entry into the equity income space.
For more news, information, and analysis, visit The ETF Yield Channel.
