Investors seeking momentum may have Invesco Variable Rate Preferred ETF (VRP – Free Report) on radar now. The fund recently hit a new 52-week high. Shares of VRP are up approximately 12.7% from their 52-week low of $23.38/share.
But could there be more gains ahead for this ETF? Let’s take a look at the fund and the near-term outlook to get a better idea of where it might be headed.
VRP in Focus
The underlying Wells Fargo Hybrid and Preferred Securities Floating and Variable Rate Index is a market capitalization-weighted index designed to track the performance of preferred stock, as well as certain types of hybrid securities that are functionally equivalent to preferred stock, that are issued by US-based or foreign issuers and that pay a floating or variable rate dividend or coupon. The expense ratio is 0.50%.
Why the move?
In its latest meeting, the Feddeclared that it expects inflation to jump to 3.4% this year, higher than its previous forecast of 2.4%. The Fed’s PCE inflation expectation has gone up to 2.1% for 2022 from 2% projected in March and to 2.2% for 2022 (from 2.1%). This has flared up the talks for faster-than-expected rate hike.
No wonder, investors would look for ways that offer solid current income or benchmark-beating income. VRP is one such option, which yields as high as 4.19% in the current low-rate environment. Investors should note that preferred ETFs are generally great options for higher current income.
More Gains Ahead?
The fund has a positive weighted alpha of 10.63. So, there is a decent outlook ahead for those who want to ride this surging ETF a shade further.
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