Notable Opportunities for Q3 | ETF Trends

With a market impacted with uncertainty, there are key areas to keep track of when looking at potential opportunities. ETF Trends spoke with Chris Huemmer, Senior Investment Strategist for FlexShares Exchange Traded Funds, about continuing trends to look at during the second quarter, and where to expect a return for investors.

Looking at continuing trends that have proved to be quite promising, from an inflows standpoint, Huemmer noted how divided ETFs are looking towards an interesting source of income, as yields on bonds are so low.

“When looking at where bond yields are, an expected return for bonds going forward would be pretty low,” Huemmer said. “So, from the portfolio standpoint, moving from equity to fixed income would be at a return gap, based on expected returns. So, really de-risking by low volatility, as opposed to shifting out of equities, might make a lot of sense for investors today.”

The Bright Spots Ahead

As far as areas with potential for opportunity, Huemmer points out infrastructure as a good play when considering a sector or asset class. Looking at the market, it’s become the disrupters versus everything else, to an extent, which should prove interesting as far as seeing how long that lasts, and what Q2’s numbers eventually look like.

On the fixed income side, it has mostly been interesting to look at from the money market space, with the prime government funds. A few of these funds have closed down because of where yields are at, which is difficult for those funds to earn investors any income.

“The stretch for yield,” Huemmer adds, “Even in the money market space that investors are probably going to have to look at, other short-duration securities that potentially provide some income at the short end of the curve, and then with higher credit involved, you’re going to have to step away from prime funds to get some income, and that’s something to look at on that end.”

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