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Hi, I am Jason Bloom, and I manage Invesco’s Fixed Income and Alternatives ETF strategy team. As I was preparing to film this update, I started by pulling the copy from a video we filmed about one year ago—and I have to say, it is striking how little has changed in the past year with respect to interest rates and the persistent inflation that supports them.  The U.S. economy — and inflation — continue to chug along.  And while countless pages are consumed each week discussing the reasons why, I come back to the statement discussed in this update a year ago that “…persistence is a historical characteristic of inflation," and, unfortunately, so are the higher rates needed to defeat it.

I am still rooting for the Fed in its battle against inflation, just as I was a year ago, and I hope they find a prudent path to cutting rates this year.  But for two years running, those hopes have been disappointed, and investors who have simply followed the positive signals regarding economic growth have been rewarded with high income in both the front of the yield curve and in high yield bonds¹.  If you were to decompose fixed income ETF flows over the past year, investors seem to have mostly missed out on the top-performing segments like high yield bonds, preferred securities and bank loans².  Investors seem to be slow to embrace the resilient data points given off by the US economy.  But it's not too late.  Invesco’s tactical asset allocation model suggests economic growth in the US is steady and improving³.  And I believe investors will continue to be rewarded with prudent exposure to high yield credit and balanced, diversified exposure to duration.  As such, we would like to take this opportunity to highlight Invesco ETFs focused on short-duration high yield bonds and bank loans — as well as core plus, municipal bonds, and an equal weight Treasury ladder.  Whether you are looking for an actively managed solution or a well-defined, passively managed portfolio, Invesco offers compelling ETF solutions.  Thanks!

1. Sources: Invesco, Bloomberg, J.P Morgan, Aladdin. Short duration treasury has remained elevated at around 5% YTD with High Yield credit yield at 7% as of March 28^th, 2024.

2.Sources: Invesco, Bloomberg, J.P Morgan, Aladdin. In 2023 High Yield, Preferred and Bank loans had return of 13.45%, 9.68% and 3.94% respectively while capturing only 3.4%, 0.3%, 0.52% of net flows respectively.

3. Sources: Bloomberg L.P., Macrobond. Invesco Solutions research and calculations. Proprietary leading economic indicators of Invesco Solutions. Macro regime data as of March 31, 2024. The Leading Economic Indicators (LEIs) are proprietary, forward-looking measures of the level of economic growth.

• Treasury is represented by the Bloomberg US Treasury Index. HY Credit is represented by the Bloomberg US Corporate High Yield Bond Index. Bank Loan is represented by the Morningstar LSTA US Leveraged 100 Index. Preferred is represented by the ICE BofA Core Plus Fixed Rate Preferred Securities Index.  An investment cannot be made into an index.

               An investment cannot be made into an index.

• Bloomberg US Treasury Index measures US dollar-denominated, fixed-rate, nominal debt issued by the US Treasury.
• Bloomberg US Corporate High Yield Bond Index measures the USD denominated, high yield, fixed-rate corporate bond market.
• Morningstar LSTA US Leveraged 100 Index is designed to reflect the performance of the 100 largest facilities in the US leveraged loan market.
• ICE BofA Core Plus Fixed Rate Preferred Securities Index is designed to track the performance of fixed rate US dollar-denominated preferred securities issued in the US domestic market.

Important Information

Not a Deposit; Not FDIC Insured; Not Guaranteed by the Bank; May Lose Value; Not Insured by any Federal Government Agency

There are risks involved with investing in ETFs, including possible loss of money. Index-based ETFs are not actively managed. Actively managed ETFs do not necessarily seek to replicate the performance of a specified index. Both index-based and actively managed ETFs are subject to risks similar to stocks, including those related to short selling and margin maintenance. Ordinary brokerage commissions apply. The Fund's return may not match the return of the Index. The Funds are subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Funds.

BulletShares Risks

Investments focused in a particular sector are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments.

The funds are non-diversified and may experience greater volatility than a more diversified investment.

Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa.

During the final year of the funds’ operations, as the bonds mature and the portfolio transitions to cash and cash equivalents, the funds’ yield will generally tend to move toward the yield of cash and cash equivalents and thus may be lower than the yields of the bonds previously held by the funds and/or bonds in the market.

If interest rates fall, it is possible that issuers of callable securities will call or prepay their securities before maturity, causing the Fund to reinvest proceeds in securities bearing lower interest rates and reducing the Fund’s income and distributions.

An issuer may be unable or unwilling to meet interest and/or principal payments, thereby causing its instruments to decrease in value and lowering the issuer’s credit rating.

Income generated from the funds is based primarily on prevailing interest rates, which can vary widely over the short- and long-term. If interest rates drop, the funds’ income may drop as well. During periods of rising interest rates, an issuer may exercise its right to pay principal on an obligation later than expected, resulting in a decrease in the value of the obligation and in a decline in the funds’ income. 

An issuer’s ability to prepay principal prior to maturity can limit the funds’ potential gains. Prepayments may require the funds to replace the loan or debt security with a lower yielding security, adversely affecting the funds’ yield.

The funds currently intend to effect creations and redemptions principally for cash, rather than principally in-kind because of the nature of the funds’ investments. As such, investments in the funds may be less tax efficient than investments in ETFs that create and redeem in-kind.

Unlike a direct investment in bonds, the funds’ income distributions will vary over time and the breakdown of returns between fund distributions and liquidation proceeds are not predictable at the time of investment. For example, at times the funds may make distributions at a greater (or lesser) rate than the coupon payments received, which will result in the funds returning a lesser (or greater) amount on liquidation than would otherwise be the case. The rate of fund distribution payments may affect the tax characterization of returns, and the amount received as liquidation proceeds upon fund termination may result in a gain or loss for tax purposes.

During periods of reduced market liquidity or in the absence of readily available market quotations for the holdings of the fund, the ability of the fund to value its holdings becomes more difficult and the judgment of the sub-adviser may play a greater role in the valuation of the fund’s holdings due to reduced availability of reliable objective pricing data.

The funds’ use of a representative sampling approach will result in it holding a smaller number of securities than are in the underlying Index, and may be subject to greater volatility. 

BulletShares High Yield ETFs

The values of junk bonds fluctuate more than those of high-quality bonds and can decline significantly over short time periods.

The risks of investing in securities of foreign issuers, including emerging market issuers, can include fluctuations in foreign currencies, political and economic instability, and foreign taxation issues.

The Fund may invest in privately issued securities, including 144A securities which are restricted (i.e., not publicly traded). The liquidity market for Rule 144A securities may vary, as a result, delay or difficulty in selling such securities may result in a loss to the Fund.

BulletShares Municipal ETFs

Municipal securities are subject to the risk that legislative or economic conditions could affect an issuer’s ability to make payments of principal and/ or interest.

Municipal securities are subject to the risk that legislative or economic conditions could affect an issuer’s ability to make payments of principal and/ or interest.

There is no guarantee that the Fund's income will be exempt from federal and state income taxes.

Preferred securities may be less liquid than many other securities, and in certain circumstances, an issuer of preferred securities may redeem the securities prior to a specified date.

Variable- and floating-rate securities may be subject to liquidity risk, there may be limitations on the Fund's ability to sell securities. Due to the features of these securities, there can be no guarantee they will pay a certain level of a dividend and such securities will pay lower levels of income in falling interest rate environment.

This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.

Shares are not individually redeemable, and owners of the Shares may acquire those Shares from the Fund and tender those Shares for redemption to the Fund in Creation Unit aggregations only, typically consisting of 10,000, 20,000, 25,000, 50,000, 80,000, 100,000 or 150,000 Shares.

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