This week, the Federal Reserve and Chair Jay Powell announced a pause to rate cuts. Looking for further movement on inflation and employment data, Powell’s comments pointed to a year of few cuts overall. That marks a significant shift for fixed income investing compared to this past fall and the months leading up to it. With 2024’s rate cut fever over, the Fed rate cut pause may now invite investors to reassess and perhaps consider an active core bond ETF like SMTH.
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Increasingly, investors are looking to active ETFs to play important roles in portfolios. Historically, however, active ETFs have largely played the “satellite” role, with passive funds instead acting as the “core” allocations. Active ETFs can play that core role, however, and, with their flexibility, prove to be an upgrade in a new, more uncertain rate regime.
Active Core Bond ETF SMTH and Rate Cuts
For example, with rates at a pause, investors may want strategies able to lean more heavily into shorter duration. An active core bond ETF could do that, while also still finding the strongest opportunities in other duration categories. Such an approach could adapt to bonds being called early and rolling bonds, too, amid greater risks and financial turbulence.
SMTH provides one option to fill that active core bond ETF role. The ALPS/SMITH Core Plus Bond ETF (SMTH ) charges 59 basis points to actively invest in global debt securities of any maturity or credit quality level. That freedom empowers its managers to seek a high level of current income and performance. SMTH constructs its portfolios from the bottom up, as well, having returned 2.68% over the last year, per SS&C ALPS Advisors data.
The rate cut story that dominated market narratives last year has paused. For those investors looking to adapt to a new regime, an active core bond ETF may intrigue.
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