Bull vs. Bear: Are High Yield ETFs Worth the Higher Risk?

Bull vs. Bear is a weekly feature where the VettaFi writers’ room takes opposite sides for a debate on controversial stocks, strategies, or market ideas — with plenty of discussion of ETF ideas to play at either angle. For this edition of Bull vs. Bear, James Comtois, and Elle Caruso debate the pros and cons of investing in high-yield fixed-income ETFs.

James Comtois, staff writer, VettaFi: Greetings, Elle! Interest rates are high, and the debt ceiling nonsense is behind us (for now). So, I’m feeling a little more risk-on with my investments these days. That’s why I’m thinking now’s the right time to target some high-yield fixed income.

We’ve heard the battle cry: Bonds are back because yields are back. That’s certainly the case with high-yield bonds. Rates are high. Like, really high. High-yield bond yields are currently yielding over 8%. That’s double where they were at the start of 2022.

At these higher-yielding levels, high-yield fixed income gives investor portfolios a much-needed cushion. It also offers the potential for an attractive total return performance, even if spreads were to widen from here.

So, what say you, Elle? Care to join me in buying some high-yield bond ETFs to diversify our portfolios? Perhaps some shares of the SPDR Bloomberg High Yield Bond ETF (JNK)? Or have I completely forgotten how this column works, and you’re about to tell me to slow my roll?