The Financial Select Sector SPDR (NYSEArca: XLF) increased 2.6% year-to-date. [Two ETF Sector Bets for April]
In the fixed-income space, Koesterich cautions against short- and mid-term duration bonds as these securities will experience higher volatility and be more sensitive to rate hike expectations in the federal fund rate.
“Last year investors would have done well to avoid long-duration Treasuries, but this year it is the short to middle part of hte yield curve that appears vulnerable (specifically the two- to five-year segment,” Koesterich warned.
The iShares 1-3 Year Treasury Bond ETF (NYSEArca: SHY) is up 0.1% and iShares 3-7 Year Treasury Bond ETF (NYSEArca: IEI) is up 0.7% year-to-date. Meanwhile, the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) increased 7.6% so far this year. [ETFs for the end of ZIRP]
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of IWM, SPY, TLT and SHY.