WisdomTree Yield Enhanced US Aggt Bd ETF (AGGY)
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'USBF' aims to apply smart beta to the bond markets.
By Kevin Flanagan, Head of Fixed Income Strategy Anyone looking for a fresh perspective from Federal Reserve (Fed) Chairman Jerome Powell last week was sorely disappointed. During his semiannual monetary policy testimony to Congress, Powell essentially reiterated his stance that, yes, the economy is in a solid recovery, but no, the recent spike in inflation is only “transitory.
Watch enough media and congressional appearances by Federal Reserve Chairman Jerome Powell and you couldn't be blamed for thinking each of those events sounds identical. At least Powell is consistent.
Endowment-style investing, popularized by the late David Swensen of Yale University, was once reserved for endowments, but thanks to Swensen's stellar long-term track record, more money managers are looking to duplicate these endowment strategies. More investors seem to be receptive to the idea too, but for advisors, building endowment-style portfolios from scratch is difficult.
When advisors evaluate model portfolios, factors including cost, efficiency, and diversification often top their checklists. Durability and longevity could be joining that list.
The Federal Open Market Committee's (FOMC) June meeting didn't result in an interest rate hike. That outcome was expected, but what caught some market participants by surprise is the dot plot indicating an increasing number of Federal Reserve members expect rate hikes to arrive in 2023.
To say 2020 has been an eventful year for fixed income investors is an understatement, but advisors can get ahead of the game for 2021 with the right model portfolio. Enter WisdomTree's Fixed Income Model Portfolio, which features exposure to eight fixed income exchange traded funds.
With interest rates at historical lows, investors will be tasked with looking for income without moving too far out in duration or, perhaps more importantly, sacrificing credit quality. While we expect the Fed to keep rates at or near zero, intermediate to longer-dated Treasury yields could still grind higher, with the yield curve steepening due to unprecedented monetary and fiscal stimulus.
Riskier assets are making their way back from the March lows. Some have easily surpassed those levels, but the time is still appropriate for advisors to increase customization and education with clients, bolstering relationships along the way.
Coronavirus fears keep rising in conjunction with bond prices, which is making the fixed income market a tricky one to navigate. One way to approach the current landscape is to implement a barbell strategy by way of ETFs.