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The Fund pursues its investment objective by investing, under normal circumstances, at least 90% of its net assets (plus any borrowings made for investment purposes) in CLOs of any maturity that are rated AAA (or equivalent by a nationally recognized statistical rating organization (NRSRO)) at the time of purchase, or if unrated, determined to be of comparable credit quality by Janus Capital. For purposes of the Funds investment policies, CLOs are floating- or fixed-rate debt securities issued in differenttranches, with varying degrees of risk, by a trust or other special purpose vehicle and backed by an underlying portfolio consistingprimarily of below investment grade corporate loans. Such loans may include domestic and foreign senior secured loans, seniorunsecured loans and subordinate corporate loans, which may individually be rated below investment grade or the equivalent ifunrated. The underlying loans are selected by a CLOs manager. Under normal market conditions, the Fund will seek to maintain aminimum of 80% of its portfolio in AAA-rated CLOs. After purchase, a CLO may have its rating reduced below the minimumrating required by the Fund for purchase. In such cases, the Fund will consider whether to continue to hold the CLO. The Fundmay temporarily deviate from the 80% policy while deploying new capital as the result of cash creation or redemption activity, orduring unusual market conditions, or highly unusual market conditions such as a downgrade in the rating of one or more CLOs.

Janus Henderson AAA CLO ETF

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WisdomTree Trust Japan Total Dividend Fund

iShares Trusthen & Steers Realty Majors Index Fund

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iShares Trust Barclays 20+ Year Treasury Bond Fund

XLRE

Federal Reserve&#39;s shift to lower interest rates can have wide-reaching effects on stocks and bonds, but quality can be found in utilities, real estate, and consumer staples sectors.

13 ETFs To Own As Fed Set To Cut Rates: Analysts Highlight Utilities, Real Estate, And More

As the Federal Reserve transitions from a restrictive monetary policy to a more accommodative stance, investors are questioning how this regime change will <a href="https://www.benzinga.com/topic/interest-rates">impact various asset classes. </a>



The central bank&#8217;s shift towards lower interest rates can have far-reaching implications across equities, bonds, and other markets.



Historically, stocks have tended to perform well following the Fed&#8217;s initial rate cuts—but with a crucial caveat: the economy must avoid slipping into a recession. An <a href="https://www.benzinga.com/economics/macro-economic-events/24/09/40855247/fed-rate-cuts-and-s-p-500-the-why-matters-most-data-shows">analysis by Goldman Sachs</a> reveals that the S&amp;P 500 has experienced significant declines even after rate cuts if the U.S. economy entered a recession during those periods.



When it comes to bonds, lower interest rates have generally led to a decrease in bond yields, thus driving up bond prices. Unlike equities, this dynamic has historically played out somewhat independently of the economic cycle. However, &#8220;what's past is prologue&#8221; is not always a guarantee in financial markets.



<h2 class="wp-block-heading">&#8216;Quality Can Be Found Across Asset Classes&#8217;</h2>



According to Bank of America&#8217;s latest Research Investment Committee (RIC) report, investors can identify quality opportunities across various asset classes, particularly in today&#8217;s shifting market landscape.



BofA analysts suggest that in the U.S. equity space, investors should adopt a defensive stance, focusing on companies with high free cash flow.



Savita Subramanian, head of U.S. equity &amp; quantitative strategy at BofA, notes that S&amp;P 500 valuations indicate low price returns for the next decade, making dividend payouts more crucial for total returns.



<ul>
<li>Utilities: Recently <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/09/40823561/this-under-the-radar-defensive-ai-sector-quietly-outperforms-all-others-despite-rec">upgraded to Overweight by BofA, </a>the utilities sector stands out for its defensive characteristics and competitive yield. Subramanian indicates that growing power demand driven by AI-linked data centers bolsters the outlook for utility companies. ETFs like the First Trust Utilities AlphaDEX ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/FXU#NYSE">FXU</a>) and the Utilities Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLU#NYSE">XLU</a>) are potential plays in this space.</li>



<li>Real Estate: Offering higher quality yield than before, with 70% of the sector rated B+ or better, the real estate sector provides attractive options. BofA notes that the S&amp;P 500 real estate segment has relatively low office exposure, which could mitigate some risks. Recommended ETFs include the Real Estate Select Sector SPDR Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLRE#NYSE">XLRE</a>) and iShares Cohen &amp; Steers REIT ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ICF#NYSE">ICF</a>).</li>



<li>Consumer Staples: BofA finds the consumer staples sector tactically attractive, especially ETFs like the Consumer Staples Select Sector SPDR ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/XLP#NYSE">XLP</a>), which has substantial exposure to resilient companies like The Procter &amp; Gamble Co. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/PG#NYSE">PG</a>), Costco Wholesale Corp. (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/COST#NASDAQ">COST</a>), Walmart Inc. (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/WMT#NYSE">WMT</a>). Another sector play here is the iShares U.S. Consumer Staples ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IYK#NYSE">IYK</a>). </li>



<li>Value, Quality, Dividends, and Buybacks: The bank is also bullish on factor-based ETFs, recommending exposure in value, quality, dividend, and buyback amid a strong free cash flow yield and potential for higher payouts than the broader S&amp;P 500 index. ETFs in this category include the Vanguard Value ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VTV#NYSE">VTV</a>), Pacer US Cash Cows 100 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/COWZ#NYSE">COWZ</a>), Schwab US Dividend Equity ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SCHD#NYSE">SCHD</a>), and iShares Core Dividend ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DIVB#NYSE">DIVB</a>).</li>
</ul>



Outside the U.S., Bank of America is bullish on Japanese equities as effective corporate reforms are expected &#8220;to unleash a mountain of cash.&#8221; The WisdomTree Japan Hedged Equity ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/DXJ#NYSE">DXJ</a>) is a top pick in this market, having gained 125% since 2019. This ETF also offers protection against the yen&#8217;s devaluation. 



In the fixed-income market, BofA suggests exposure to AAA-rated collateralized loan obligations (CLOs) and long-dated Treasury bonds.



<ul>
<li>CLOs: BofA recommends the Janus Henderson AAA CLO ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JAAA#NYSE">JAAA</a>), viewing these loans as quality yield options that have withstood stress during both the 2008 financial crisis and the 2020 pandemic-induced downturn.</li>



<li>Long-Dated Treasuries: Investors looking for duration exposure can consider the iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>), which tracks long-dated Treasury bonds with a 17-year duration.</li>
</ul>



<figure class="wp-block-table is-style-stripes"><table style="overflow:auto; height: 90px; display: block;"><thead><tr><th>Asset Class</th><th>Name</th></tr></thead><tbody><tr><td colspan="3">Equities</td></tr><tr><td>Utilities</td><td>First Trust Utilities AlphaDEX ETF</td></tr><tr><td>Utilities </td><td>Utilities Select Sector SPDR Fund</td></tr><tr><td>Real Estate</td><td>Real Estate Select Sector SPDR Fund </td></tr><tr><td>Real estate</td><td>iShares Cohen &amp; Steers REIT ETF</td></tr><tr><td>Consumer staples</td><td>Consumer Staples Select Sector SPDR ETF </td></tr><tr><td>Consumer staples</td><td>iShares U.S. Consumer Staples ETF</td></tr><tr><td>Value</td><td>Vanguard Value ETF</td></tr><tr><td>Quality</td><td>Pacer US Cash Cows 100 ETF </td></tr><tr><td>Dividend</td><td>Schwab US Dividend Equity ETF</td></tr><tr><td>Buybacks</td><td>iShares Core Dividend ETF </td></tr><tr><td>Japan</td><td>Wisdom Tree Japan Hedged Equity ETF</td></tr><tr><td colspan="3">Fixed income</td></tr><tr><td>Credit</td><td>Janus Henderson AAA CLO ETF</td></tr><tr><td>Duration</td><td>iShares 20+ Year Treasury Bond ETF </td></tr></tbody></table></figure>



Read Next:



<ul>
<li><a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/09/40887448/long-dated-treasury-bond-etf-hits-14-month-highs-ahead-of-imminent-fed-rate-cut">Long-Dated Treasury Bond ETF Hits 14-Month Highs Ahead Of Imminent Fed Rate Cut</a></li>
</ul>



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