Markets capitulated Monday on renewed recession fears following weekend comments from the current administration. Investors looking to position defensively in cash or cash-like strategies would do well to consider the the NEOS Enhanced Income 1-3 Month T-Bill ETF (CSHI ).
Following on the heels of a tumultuous week in markets due to tariff worries, fresh concerns of recession rocked markets on Monday. Over the weekend, new comments from President Trump reflected an acceptance of potential recession due to current policies, reported WSJ. Meanwhile, Commerce Secretary Howard Lutnick spoke to NBC, remarking “There’s going to be no recession in America.”
The mixed messaging from the current administration echoes that surrounding tariffs in recent weeks. It all adds to heightened uncertainty, and investor fears. The Nasdaq Composite plummeted over 4% in trading Monday, following last week’s losses of 3.5%. Meanwhile the S&P 500 fell 2.8% Monday after declining 3.1% the previous week.
The WSJ Dollar Index gave up any gains it made since the November election after falling last week by the largest amount in two years. At the same time, the 10-year U.S. Treasury fell to 4.23% from Friday’s 4.31%.
In an environment of heightened risk and uncertainty, investors should consider the NEOS Enhanced Income 1-3 Month T-Bill ETF (CSHI). The fund currently has a distribution rate of 5.30% and a 30-day SEC yield of 4.00% as of February 28, 2025. Distribution rate annualizes the most recent distribution and then divides by the fund’s NAV.
Hedge For Recession and Other Risks With CSHI
CSHI is actively managed and seeks to generate high monthly income with its options-based strategy. The ETF seeks to deliver 100-150 basis points above what 1-3 month Treasuries are yielding. It is long on three-month Treasuries and sells out-of-the-money SPX Index put spreads. These roll weekly to account for market changes and volatility.
The put options that the fund uses are not ETF options but instead are S&P 500 index options. These options receive favorable tax treatment as Section 1256 Contracts under IRS rules. This means the options held at the end of the year are treated as if sold on the last market day of the year at fair market value.
Any capital gains or losses are taxed as 60% long-term and 40% short-term. Notably, this tax treatment applies regardless of how long the options were held which can offer noteworthy tax advantages.
A portion of CSHI’s distributions also qualify as Return of Capital. These distributions are a return of some (or all) of the original investment made into an asset. In some cases, it is a return on premium earned by an investment as opposed to principal.
The fund’s managers also may engage in tax-loss harvesting opportunities throughout the year on the put options. CSHI has an expense ratio of 0.38%.
For more news, information, and analysis, visit the Tax-Efficient Income Channel.
