Despite the Twitter scolding from U.S. President Donald Trump, the capital markets are expecting the Federal Reserve to hike rates a fourth time for 2018. As such, fixed-income exchange-traded fund (ETF) investors should position their portfolios ahead of the key rate decision on Wednesday.
The last couple of months sent a signal to stock investors that due diligence is necessary when screening for quality U.S. equities that can be resilient during times of volatility, but it also put fixed-income investors on notice that the same strategy is necessary for the bond market. One emerging theme that rose out of the volatility was a need for more short duration exposure as external headwinds face fixed-income markets going forward.
The recent volatility in U.S. equities was made evident by investor flights to the bond market with the latest BlackRock Global ETP Landscape report showing that fixed income products received the majority of November’s exchanged-traded product (ETP) flows.
According to report, Global ETPs saw inflows of $56.5 billion in November, which represents its best month since January with a concentration in fixed income of 33 percent or $18.7 billion. Of that amount heading into fixed income, just over $9 billion was allocated towards U.S. Treasury funds.
Within the capital allocated towards U.S. Treasury funds, short maturity funds saw inflows of $7.5 billion. In fact, short maturity funds accounted for $11.3 billion across the board for all fixed income products.