From my perspective, the Fed’s “go-it-super-slow” approach is bullish for longer duration bonds that one can acquire via Vanguard Long Term Bond (BLV). I might also look to scoop up intermediate-term municipal bonds via SPDR Nuveen Muni (TFI) or longer-term munis via Market Vectors Long Municipal Index Fund (MLN).
Without question, the largest players in the financial markets have unwavering confidence in monetary powers. Some of those large players include the companies themselves, entities that have offered low yielding debt to the risk-averse and used the proceeds to “acquire-n-retire” corporate shares. Probability alone might suggest that three calendar years without a 10% correction speaks volumes about irrational optimism. Nevertheless, investors with higher-than-desired cash levels cannot ignore Fed-infused capital appreciation potential.
The ultimate question, then, is which stock ETFs may offer the best risk-reward possibilities. The Bespoke Investment Group simplified the answer by tracking the divergences in advance-decline lines. In brief, fewer small- and mid-sized corporations have participated in the 2014 rally; exposure to small-cap stock ETFs and mid-caps stock ETFs tracking the S&P 600 and S&P 400 respectively should be lessened. In contrast, one might dollar-cost average into larger-cap stock ETFs where the bull market still charges forward. I like iShares USA Minimum Volatility (USMV) and iShares S&P 100 (OEF).
