Advisors plan to allocate more to fixed income ETFs as 2024 approaches. In a poll conducted by VettaFi, attendees were asked what bond changes they were considering heading into year-end. And 60% of respondents said they plan to add to fixed income ETF exposure using proceeds from cash and/or equities.
Fund managers on a panel at VettaFi’s Income Strategy Symposium believe the Federal Reserve is approaching the end of its rate hiking cycle. According to panelist John Croke, Vanguard’s head of active fixed income product strategy, this means now’s a good time for investors to put some cash back into the bond market.
“We believe the Fed is at or near the end of the hiking cycle,” Croke said during the panel on October 27. And despite the recently released GDP report, Vanguard’s economists are forecasting “a mild recession in the middle of next year.”
Croke added that, when looking at short and long rates alike, Vanguard expects the Fed funds rate “will be closer to 4% than 5%.”
See more: “Target Short- and Intermediate-Term Bonds ETFs”
Bond Market Entry Points for Investors Overweight Cash
So, Croke suggests investors who want to buy into the bond market buy in with a single ETF. That’s where the Vanguard Total Bond Market ETF (BND) might be worth considering.
BND provides broad exposure to the taxable investment-grade U.S. dollar-denominated bond market, excluding inflation-protected and tax-exempt bonds.
Another ETF that Croke recommended for investors overweight cash and want to get back into the bond market was the Vanguard Ultra-Short Bond ETF (VUSB).
VUSB invests in a diversified portfolio of high-quality and, to a lesser extent, medium-quality fixed income securities. The fund maintains a dollar-weighted average maturity of zero to two years.
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