There are a lot of investing edicts to be found out there, whether in books, online, financial TV, or just around the proverbial water cooler. Markets would do well to remember one such piece of wisdom right now: “Don’t fight the Fed.” That’s the reminder in a recent insight from American Century Investments, and it may be a timely one. It’s a lesson that also invites investors to consider how a current income ETF like the American Century Multisector Income ETF (MUSI) may help them face such an uncertain situation.
Markets have been investing into risky assets at the turn of the year, with riskier assets performing well in the fourth quarter of 2022 — but that may not be the most appropriate choice given the path of monetary policy, according to Richard Weiss, CIO of multi-asset strategies at American Century.
Market participants are expecting a pivot to looser monetary policy on top of a pause in Fed rate hikes based on Fed funds futures, which is not what the Fed has been saying. The Fed’s own “Dot-Plot” projection for future rates shows no pivot before 2024 — a distinct contrast to what markets are seeing based on fund futures.
That may make a strategy that can buoy your portfolio through market volatility a worthwhile idea. A current income ETF is just one way to do that, and MUSI is a real candidate to consider thanks to its approach. The ETF is actively managed and charges 36 basis points for its approach, investing across the fixed income spectrum in debt securities without a specific target duration based on a sector rotation approach backed by fundamental and quantitative inputs.
MUSI has outperformed its ETF Database category average over one month, returning 2.3% in that time. The current income ETF also provides a 1% annual current yield, adding to $19 million in net inflows over the last month, as well.
Investors should be taking the Fed’s decisions into account, and as the old adage goes, not fighting the rising tide of interest rates. Instead, it may be worth adding some income to your portfolio and waiting for more information with a current income ETF like MUSI.
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