ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. ETF Strategist Channel
  2. Fixed Income Windows of Opportunity
ETF Strategist Channel
Share

Fixed Income Windows of Opportunity

Stringer Asset Management   Dec 15, 2022
2022-12-15

The financial services industry has operated in a falling interest rate environment for decades, which made it relatively easy for financial professionals to find high quality yield sufficient to meet income goals. Everything changed in mid-2020 with a historic spike in rates that hammered valuations and created a more difficult environment for buy and hold fixed income investors. As the smoke cleared, bond investors saw a brief window where bond inventories were again flush with high quality issuance and attractive yields, but that window seems to have recently closed leaving many investors scratching their heads regarding their next steps.

So, what’s the solution? We think one option is to take a more tactical approach to fixed income that can match your positioning with your interest rate and credit outlook. Looking back to late 2020 and into 2021, it was obvious to many that the historically low yield on the 10-year Treasury was a temporary phenomenon. The U.S. Federal Reserve was embarking on an unprecedented rate rise to battle inflation, and the entire yield curve was getting ready to rise significantly.

Exhibit One Stringer

In that environment, it made a lot of sense to own things like Treasury Inflation Protected Securities (TIPS), asset-backed securities, and short term bank loans whose floating rate could benefit from the increase in interest rates. In simple terms, taking advantage of floating rate bonds, reducing your duration, and not worrying as much about your credit risk worked well as the move in rates turned out to be one of the largest percentage changes in yields going back to the late 1960s. These huge interest rate moves were very difficult to navigate if you stuck to using individual bonds in some laddered strategy.

To add onto that tactical approach, using very liquid ETFs can make actively managing and adjusting to exposures and durations much simpler. Our work suggests that we are on the other side of that large interest rate move, and long-term rates have already begun to come down as inflationary pressures decrease, and recessionary risks increase. With ETFs, investors can easily and efficiently move from an underweight in Treasuries to an overweight, while also increasing duration and interest rate risk and decreasing credit risk, which can be more appropriate in a recessionary environment. These moves would be very difficult to manage with individual bonds, especially if you’re trying to diversify across different fixed income types to take advantage of where you are seeing the best value.

We think the flexibility that ETFs afford investors in these volatile markets makes a lot of sense. That is not to say that individual bond investors and advisers who specialize in that area should abandon what they are doing. Quite the opposite, actually. For many investors, finding good quality bonds at a discount with more attractive yields still makes tremendous sense. Innovations in the ETF landscape now provide many excellent options for investors to compliment and tweak a bond strategy to help them better match the environment.


Content continues below advertisement

DISCLOSURES

Any forecasts, figures, opinions or investment techniques and strategies explained are Stringer Asset Management, LLC’s as of the date of publication. They are considered to be accurate at the time of writing, but no warranty of accuracy is given and no liability in respect to error or omission is accepted. They are subject to change without reference or notification. The views contained herein are not be taken as an advice or a recommendation to buy or sell any investment and the material should not be relied upon as containing sufficient information to support an investment decision. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested.

Past performance and yield may not be a reliable guide to future performance. Current performance may be higher or lower than the performance quoted.

The securities identified and described may not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable.

Data is provided by various sources and prepared by Stringer Asset Management, LLC and has not been verified or audited by an independent accountant.

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X