While unemployment has risen and market volatility is a significant curiosity, the market has had a great run this week. ETF Trends CEO Tom Lydon appeared on TD Ameritrade Network on Thursday to speak with “Markets In Motion” host Nicole Petilides about how things have been working to help people out.
In regards to the Fed and Congress working on more stimulus, Lydon expressed a positive attitude in regards to government support arriving perfectly choreographed with today’s negative employment news.
“What’s going on in the bond market, especially in the corporate bond and ideal market, is really important,” Lydon said. “ETFs play a big role, as they usually account for about a third of trading on the big exchanges. But now, it’s about 45%, and shoring up the bond market is a big part for investors today.”
Investors have essentially been moving from the safety of treasuries over to corporates and high yields, putting themselves in a situation where many were stunned by this current decline in the market. So, having the government come in to buy corporates, high yield bonds, and fallen angels brings added support and confidence to investors today, as reflected in the markets.
Focusing In On Volatility
In regards to volatility, while off some previous lows, it now comes down to whether or not that will continue. Lydon notes how it is uncertain at this time as far as what to expect. However, when looking at the play-by-play put forth by the government so far, it’s been very encouraging. That in mind, there will be more unemployment news next week.
Unfortunately, 50 million people are still waiting on checks from the government stimulus checks. Small businesses are waiting to hear about their PPP loan applications, which makes one wonder how the new $2.3 trillion will head to states, cities, and small and mid-size businesses.
“I would recommend to most investors, especially financial advisors, to stick to their discipline,” Lydon adds.
Rebalancing at the end of March was one way to handle things. Investors went in and bought more stocks and sold more bonds to rebalance their portfolios. Keeping with that structure worked, and there was, in fact, a rebound that rewarded clients.
Looking Out For Angels
Switching gears to a few ETF picks, Lydon brings up LQD and HYG but is specifically focused on the VanEck Vectors Fallen Angel ETF (ANGL). With the government focused on low investment-grade bonds, ensuring that market up, there are companies in ANGL such as Ford and Macy’s, which need the support. So having outside investors coming in and buying those bonds through this ETF is great.
Additionally, Lydon points out how strong the gold market has been. Many investors of the last five years have diversified in hedge portfolios by investing in gold. There’s demand around the world, especially in emerging markets, as citizens in these countries have more disposable income to put to work. So, GLD, the largest gold ETF, is a good fund to look at, especially if there’s more volatility on the way.
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