BAB ETF

BAE Systems PLC (LSE:BA.) and Babcock International PLC (LSE:BAB) are expected to benefit from a sharp rise in UK defence spending, according to Panmure Liberum.

JPMorgan analysts have highlighted further upside at the likes of BAE Systems PLC (LSE:BA.) and Babcock International PLC (LSE:BAB) as Europe plays catch up in its efforts to rearm.

The Invesco Taxable Municipal Bond ETF gives investors access to the municipal bond market for diversification and the possibility of increased yields. The BAB ETF focuses on high-grade bonds, particularly in the Local Authorities sector, which can be a double-edged sword. However, BAB has not performed as well as other municipal bond funds, possibly because of its duration and sampling strategy, making it a less attractive investment choice.

BAB: A Different View On Muni Bonds, But Not A Better One

With the expectation that the U.S. Federal Reserve will taper interest rate hikes in the second half of 2023, fixed income investors are turning to more yield. They may find what they're looking for in municipal bonds.

With uncertainty around interest rates, inflation, and the possibility of recession, most investors will benefit by staying within the short to intermediate part of the curve when allocating to fixed income ETFs. Similarly, opting for balanced fixed income exposure as opposed to making big bets is recommended in the current environment.

Fixed income has seen a broad boost since late last year. This includes taxable muni bonds and BAB by extension. The fund is up sharply since my last buy call and gains could continue. However, I think it makes sense to get a bit more cautious whenever I see big gains like this.