The market environment is changing, but investors can also adapt through exchange traded fund strategies to best position for the changes ahead.
For instance, one of the greatest risks fixed-income investors face today is the rising interest rate outlook out of the Federal Reserve as the U.S. economy continues to strengthen.
“We think the first implication is the 10-year interest rates will go to 3.5%,” Jan F. van Eck, CEO of VanEck, said at the Inside ETFs 2018 conference.
“What you actually see is that the safer your bonds, the bigger your risk because if interest rates go up by 100 basis points, Treasuries go down 6%, whereas high-yield and emerging markets – where you have a little yield cushion – basically stay flat in that environment,” van Eck said.
Consequently, van Eck argued that investors should be wary of their traditional U.S. government bond exposure and may be start branching out to other options to generate improved returns.