One lesson to be taken away from August’s stock market volatility is why diversification is so important.
For now, the market does seem to be in good shape following Wednesday’s as-expected CPI results. However, as the recent selloff has illuminated, the market’s trajectory could quickly change, should investors see any possible recession indicators.
That’s why a diversified portfolio can be key to success. One means of doing so is by using global bond ETFs, which can provide income and capital growth, even if U.S. equities are currently facing volatility.
Diversified Currency Exposure
One such fund is the Invesco International Corporate Bond ETF (PICB ). The fund offers diversified fixed-income exposure through a portfolio of global investment-grade corporate bonds.
PICB is benchmarked to the S&P International Corporate Bond Index. The index tracks the performance of investment-grade corporate bonds issued in currencies of G10 countries, excluding the U.S. dollar. Currently, the fund has a strong currency allocation toward the Euro, along with the British Pound and Canadian Dollar.
In terms of country exposure, PICB weighs more heavily towards France, Canada, and the United Kingdom. This can be extremely beneficial for investors, as all three countries are seeing some positive indicators of economic growth.
As the Olympic Games come to a close in Paris, recent data from Visa highlights the economic boost France’s tourism industry experienced during the games. Meanwhile, the IMF noted last month that Canada’s economy seems to have reached a soft landing.
The good news isn’t limited to France and Canada, either. Yesterday, the United Kingdom saw strong data supporting slowing inflation and increased consumer spending.
All in all, these are countries that are worth staying engaged with now, especially in investment-grade bonds. By utilizing PICB, investors can access global income and capital appreciation while remaining de-risked from U.S. economic news.
PICB’s performance is showing signs of steady growth, which could be buoyed by economic recovery in France, the U.K., and Canada. Per Invesco, PICB’s NAV has risen over 5% in the last 12 months, as of July 31st, 2024.
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