The consumer price index (CPI) for October increased 0.4% from the prior month and 7.7% from a year ago, indicating that inflationary pressures are starting to cool. However, inflation remains considerably higher than the Fed’s 2% target, and the cost of living is still quite high.

Moreover, with the target interest rate at 3.75%-4% after the fourth consecutive 75-basis points rate hike and expected to rise beyond 5%, a mild U.S. recession might still be on the cards.

Diversification can be the best strategy to minimize portfolio risks given an uncertain economic outlook. Being backed by the government, Treasury bills are considered a safe asset class. Also, the potential slow pace of rate hikes could bring T-bills back in favor. Therefore, the SPDR Bloomberg 3-12 Month T-Bill ETF (BILS) could now be a solid portfolio addition.

On the other hand, the energy sector has gained significant popularity on the back of tight supply due to the Russia-Ukraine war and the OPEC+ output cuts. Hence, the iShares MSCI Global Energy Producers ETF (FILL) might be a solid buy now.

SPDR Bloomberg 3-12 Month T-Bill ETF (BILS)

Employing a sampling strategy, BILS seeks to track the performance of an index that is designed to measure the performance of public obligations of the U.S. Treasury that have a remaining maturity of greater than or equal to 3 months and less than 12 months.

As of November 10, BILS had $461.82 million in assets under management and a NAV of $99.32. Its gross expense ratio of 0.135% is significantly lower than the category average of 0.18%.

As of November 9, the fund’s top holdings include TREASURY BILL 0 02/02/2023 with a 9.45% weight, TREASURY BILL 0 04/20/2023 with a 7.46% weight, and TREASURY BILL 0 02/23/2023 with a 7.23% weight.

Over the past year, the fund’s net inflow came in at $442.57 million. Its net inflow stood at $288.13 million over the past month. As of November 9, BILS’ fund distribution yield was 0.97%.

BILS has declined marginally over the past year and year-to-date to close its last trading session at $99.38.

BILS’ strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The ETF has a Trade, Buy & Hold, and Peer grade of A. In the 40-ETF Government Bonds ETFs group, it is ranked #6.

Click here to see all POWR Ratings for BILS.

iShares MSCI Global Energy Producers ETF (FILL)

FILL offers exposure to the global energy sector through a diverse portfolio of domestic and international equities. The fund generally invests at least 80% in the underlying index that measures the combined performance of equity securities of companies in both developed and emerging markets.

As of November 10, the fund had $132.68 million in net assets and a NAV of $25.51. As of October 31, its trailing-12-month yield stood at 3.38%. Its expense ratio of 0.39% is lower than the category average of 0.46%.

The fund’s top holdings include Exxon Mobil Corporation (XOM) with a 16.02% weight, Chevron Corporation (CVX) with an 11.59% weight, Shell plc (SHEL) with a 7.04% weight, and ConocoPhillips (COP) with a 5.66% weight.

The fund’s net inflows came in at $5.46 million over the past year and $40.57 million over the past three years. FILL has gained 35.2% over the past year and 42.2% year-to-date to close its last trading session at $25.36. It has a five-year beta of 1.32.

FILL’s promising outlook is reflected in its POWR Ratings. The ETF has an overall A rating, equating to a Strong Buy in our proprietary rating system.

FILL has an A grade for Trade, Buy & Hold, and Peer. It is ranked #2 out of 133 ETFs in the Global Equities ETFs group.

To see the POWR Ratings for FILL, click here.

BILS shares were trading at $99.35 per share on Friday morning, down $0.03 (-0.03%). Year-to-date, BILS has gained 0.32%, versus a -15.94% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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