Bond exchange traded funds gained on Wednesday as investors cut exposure to risk assets in anticipation of changes to the easy money supply.
Emily Roland, co-chief investment strategist at John Hancock Investment Management, warned that we won’t get the same boost next year as we did in 2021, and investors will have to re-evaluate their risk exposure without benefits like stimulus checks and supportive post-pandemic policies, the Wall Street Journal reports.
“Don’t get too comfortable in the fast lane,” Roland said. “Next year, we just don’t see the highest-risk parts of the market leading, and we’re actually looking to trim risk into spring.”
Meanwhile, despite strong earnings out of retailers, with many brushing off concerns over rising consumer prices, investors remain focused on the elevated inflation levels. Many are concerned about how the increase in prices could hurt growth and push the Federal Reserve to tighten its policy sooner rather than later.
“The inflation fear is still there and those keep creeping in and discussion that we’re having of – is it transitory, is it supply driven – that’s still in the market,” Joe Saluzzi, co-manager of trading at Themis Trading, told Reuters.
“The Fed will hold as long as they can … But if (inflation) continues to go higher, and you continue to see inflationary pressure, then it becomes a question of how many and how often will (rates) rise,” Saluzzi added.
Investors looking to strengthen their fixed income strategies can consider the Avantis Core Fixed Income ETF (AVIG), which invests in a broad set of debt obligations across sectors, maturities, and issuers. AVIG pursues the benefits associated with indexing, such as diversification and transparency of exposures. However, the fund also has the ability to add value by making investment decisions using information embedded in current yields.
The Avantis Short-Term Fixed Income ETF (AVSF) also invests primarily in investment-grade quality debt obligations from a diverse group of U.S. and non-U.S. issuers with a shorter maturity.
The actively managed American Century Diversified Corporate Bond ETF (NYSEArca: KORP) invests in U.S. dollar-denominated corporate debt securities issued by U.S. and foreign entities, but may also hold securities issued by supranational entities. Up to 35% of the fund’s net assets may be invested in high-yield securities or junk bonds. The fund may also invest in derivative instruments such as futures contracts and swap agreements. The weighted average duration of the fund’s portfolio is expected to be between three and seven years.
Additionally, the actively managed American Century Multisector Income ETF (MUSI) is designed for investors pursuing consistent income in a tax-efficient ETF vehicle. The team targets attractive yield throughout the market cycle while offering investors access to a diverse opportunity set of securities, including investment-grade corporates, high-yield corporates, emerging market debt, and securitized bonds.
For more news, information, and strategy, visit the Core Strategies Channel.
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