The Federal Reserve is finding that its words are swaying the markets more than ever when it comes to interest rate policy and how to combat inflation these days. Fed Chair Jerome Powell warned of more potential pain ahead as the central bank continued to beat the hawkishness drum, sending Treasury yields higher.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said in prepared remarks at the annual Jackson Hole, Wyoming symposium. “These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.”
“We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2%,” he said.
With more pain ahead and a potential recession to follow, getting core bond exposure is essential to shore up a portfolio. Prospective investors can opt to take on several bond issues for diversified fixed income, but there’s an easier way.
Get Core Bond Exposure
To get bond exposure amid turbulent times, there are a plethora of options available, from Treasury bonds to investment-grade corporate options. However, for a more all-inclusive approach to getting core exposure, consider the Vanguard Total Bond Market Index Fund ETF Shares (BND).
BND seeks the performance of the Bloomberg U.S. Aggregate Float Adjusted Index, which represents a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States, including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than one year.
Bond investors can use BND as a traditional hedging component when the equities market goes awry, should a recession hit. Short-term traders can also use the ETF given its dynamic ability to be bought and sold quickly in the open market.
For more news, information, and strategy, visit the Fixed Income Channel.