Rosy Corporate Earnings Outlook Could Fuel These ETFs

As a Wall Street Journal report noted, corporate profits are on the rise after a majority of companies have reported their first-quarter earnings. In turn, this could bring more fixed income investors to corporate bonds if the profit outlook remains rosy.

"Earnings per share for companies in the S&P 500 now look to be up 5.2% from a year earlier, according to FactSet, better than the 3.4% analysts expected at the end of March, and marking the strongest growth in nearly two years," the WSJ report said, noting that second-quarter results could be even better.

"They now expect second-quarter earnings per share to gain 9.8%, compared with 9% at the end of March," the report said further. "The last time analysts spent the first month of a quarter raising rather than lowering earnings estimates was during the fourth quarter of 2021, according to FactSet earnings analyst John Butters."

As the WSJ report noted, corporate profits are a prime indicator of a strong economy. If profits continue to rise, corporate bonds can present an attractive option, especially in the current market environment where eventual rate cuts can spur these bonds higher.

For broad exposure, consider using the Vanguard Total Corporate Bond ETF ETF Shares (VTC). The fund seeks to track the performance of the Bloomberg U.S. Corporate Bond Index, which measures the investment-grade, fixed-rate, taxable corporate bond market. The index includes U.S.-dollar-denominated securities publicly issued by industrial, utility, and financial issuers. The fund features a low 0.04% expense ratio and, as of May 6, a 30-day SEC yield of 4.16%.