It’s certainly no secret that some advisors are viewing fixed income as a safe haven from U.S. equity volatility. Given the correlation dynamic between stocks and bonds, this shouldn’t come as a particular surprise. That said, uncertainty in the U.S. market could lead to long-term effects on the Federal Reserve’s rate-cutting regimen. Should the Fed finally move to cut rates again, many bond portfolios could stand to benefit.
However, inflationary pressures continue to be a concern for the U.S. economy. While rate hikes don’t seem to be on the table just yet, it’s difficult to foresee how things will change down the line. Long-term uncertainty could affect how advisors are looking at their bond portfolios. A portfolio filled with longer-duration bonds could be exposed if rates rise over the long term.
For now, it may be best to stick with short-duration bonds. A shorter bond portfolio can face less risk from long-term interest rate shifts. Meanwhile, bonds with shorter maturities can still enjoy current interest rates, along with potential rate cuts later in 2025.
Short-Duration ETF SDSI May Offer a Diverse Opportunity Set
For investors looking to fortify their short-duration bond exposure, the American Century Short Duration Strategic Income ETF (SDSI) may be able to help. The ETF looks to stand apart from the competition by focusing on tactical sector diversification.
As an actively managed fund, SDSI offers broad exposure to a variety of short-duration bond sectors. This includes U.S. Treasuries, high yield bonds, and corporates from both U.S. and non-U.S. markets.
SDSI’s portfolio team will continue to monitor macro conditions and pivot sector allocations to capitalize on valuations and long-term trends. Given the level of macroeconomic uncertainty present in the global market right now, this active management can offer a significant boon.
Recent results are showing how SDSI’s strategy is delivering profit to its investors. As of April 30, 2025, the fund has a 30-day SEC unsubsidized yield of 5.11%. The fund also offers noticeable capital appreciation, with SDSI growing by over 7% over the last 12 months, as of April 30, 2025.
Register today for our Active Approach to Meeting the Market Moment webcast, May 22, 2025 at 12:30 p.m. ET.
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