Interest rates and central bank policies remain a large factor in today’s market environment, and stock exchange traded fund investors should know how to act accordingly.
ETF Trends’ Tom Lydon recently sat down with Linda Zhang, Senior Portfolio Manager & Head of Research at Windhaven Investment Management, one of the largest so-called ETF strategists in the space, to discuss how interest rates can affect the equities market.
“One of the challenges for equities, or for any asset class, is potential rise in interest rates,” Zhang said.
Zhang singles out the utilities sector. Areas with debt financing like utilities are vulnerable to rising rates. So, ETFs with heavy concentrations to utilities, like low-volatility strategies, may also underperform in a rising rate environment.
Additionally, companies that dish out high dividends can also suffer under rising rates because of their fixed-income-like, cash-flow qualities.
“Equities have different rate sensitivities,” Zhang said.
Watch the video below to see the full interview with Linda Zhang.
To view past video interviews, visit our video section.