Lastly, short-term rates could rise while long-term yields fall, which could point to a slowing U.S. economy as corporate borrowing costs rise. Consequently, high-yield options and high-quality long-duration bonds could outperform. For example, the Vanguard REIT ETF (NYSEArca: VNQ) provides broad exposure to yield-generating real estate investment trusts – VNQ has a 3.5% 12-monthy yield. Moreover, the iShares 20+ Year Treasury Bond ETF (NYSEArca: TLT) provides exposure to long-term U.S. debt, which would benefit the most as long-term bond yields fall.
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of SPY.