With many reasons for people to be concerned, not just about the valuations on the equity side, based on inflation, there are funds investors can look to. During “The Claman Countdown” on Fox Business, host Liz Claman spoke with ETF Trends’ CEO, Tom Lydon, about the ETFs to be thankful for, based on where the market is currently at.
According to Lydon, on the fixed income side, with the Barclays Aggregate Bond Index down 5% YTD, causing people to go short term, they are looking at TIPs (US Treasure Inflation Protection ETFs), which has seen a record amount of flows, with $7 billion coming in the last four weeks.
In relation to that, the iShares TIPS Bond ETF (TIP) keeps up with inflation, which is something for investors to consider.
“There’s a lot of money going into cash. $7 trillion alone is going into money market funds as well,” Lydon adds.
There are also alternative strategies people are turning to outside of fixed income. For example, dividends and areas such as options overlay strategies with equities, and quantities as well. “You’ve got to keep up with inflation,” Lydon notes, as it will make all the difference as far as which opportunities to take into consideration.
Looking at commodities, the big area of note is the Invesco Optimum Yield Commodities ETF (PDBC). It’s up 45% YTD. Commodities have attracted flows. With that said, while all commodity assets classes have advanced, surprisingly, gold has been the worst performer of the group and has seen net redemptions YTD. Whether or not the extended period of inflation allows gold to act as the second-half player it tends to be has yet to be seen.
As far as why to get into a money market fund, Lydon notes how the Barclays Agg has been the benchmark for 30 years, which has done really well when dealing with declining interest rates. However, currently, sticking with it for an extended period of time while going through 2-4 years of rising interest rates, people are not only going to get a minimum yield, there’s going to be a loss of principal.
Lydon adds, “A lot of people with that 60-40 balance are moving some of that 40 over into the 60.”
For more market trends, visit ETF Trends.