The recent spouts of market volatility may have highlighted more than just recession concerns.
In the latest edition of The BEAT at Natixis broke down what the volatility risks may mean for the market. While the equity volatility may signal economic worries, the Natixis paper looks closer at crowded market conditions.
“The economy is certainly slowing, but we see this as a normalization of economic activity and the employment situation, more so than a collapse. However, this catalyzed a sudden exit from crowded positions in a very narrow market and caused volatility to spike,” Natixis added. “We do believe volatility should be elevated, but we do not believe its signal is particularly strong in calling for a hard landing due to the related technicals.”
For investors seeking to diversify away from overcrowded mega-cap equities, consider adding more bond exposure to your portfolio. By building up a stronger bond blueprint, investors can lock in good yields while evading the overconcentration risk in equities. With the Federal Reserve positioned to push through a rate-cutting cycle, bond yields can be well positioned to benefit from rate shifts.
Opt for Core Bonds
To diversify and build up attractive income, consider the Eaton Vance Total Return Bond ETF (EVTR ). The fund can bolster core bond exposure by bringing in a well-diversified mix of fixed income securities.
EVTR focuses on bringing good returns over a market cycle between three to five years. However, the fund maintains a well-rounded duration portfolio, providing short-, medium-, and long-duration fixed income securities.. As of August 31st, 2024, over 33% of EVTR’s assets have a duration between 0-3 years.
With an active management team, EVTR is extremely well-positioned to give investors consistent results, regardless of crowding in equities. By primarily investing in investment-grade
securities, EVTR maintains a good risk profile while cashing in on strong bond yields.
Resonating fund flows highlight how investors are opting for the Eaton Vance strategy ahead of rate cuts. As of September 12th, 2024, EVTR has seen over $96 million in net flows over the past month.
For more news, information, and analysis, visit The ETF Yield Channel.
