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Why Investors Should Increase Their Allocation to Bond ETFs Now
In this episode of ETF Spotlight, I speak with Steve Laipply, Managing Director, and Global Co-Head of iShares Fixed Income ETFs at BlackRock. The world’s largest asset manager offers over 400 ETFs in the U.S. markets, including 116 fixed income ETFs, both active and index tracking, across a variety of strategies.
Bonds have regained popularity, mainly due to yields reaching levels not seen since the financial crisis. As a result, fixed income ETFs have experienced significant inflows, as bonds are now considered a viable alternative to stocks.
Recent banking turmoil and concerns about an impending recession have further driven investors towards "safer" areas of the market. The iShares 20+ Year Treasury Bond ETF (TLT - Free Report) has emerged as the top asset gainer of 2023.
According to BlackRock, the new era of increased macro and market volatility is here to stay and necessitates a new investment approach that involves more frequent asset allocation adjustments. They believe that most investors have not allocated enough to fixed income and should increase their allocations in light of the generational opportunity.
Earlier this year, investors favored cash-like ETFs such as the iShares Short Treasury Bond ETF (SHV - Free Report) . However, recently there has been a preference for high-yield options, leading to increased buying of ETFs like the iShares IBoxx High Yield Corporate Bond ETF (HYG - Free Report) . How should investors position their portfolios now?
While inflation is displaying signs of moderation, it is still expected to remain at elevated levels in the coming months. Therefore, it may be worthwhile to consider the iShares 0-5 Year TIPS Bond ETF (STIP - Free Report) and the iShares Inflation Hedged Corporate Bond ETF (LQDI - Free Report) .
Due to ongoing market volatility, investors have shown a greater interest in actively managed ETFs. The newly launched BlackRock Flexible Income (BINC) aims to outperform and provide long-term income by investing in fixed income sectors such as high yield, emerging markets debt, and securitized assets.
Tune in to the podcast to learn more.
Make sure to be on the lookout for the next edition of the ETF Spotlight! If you have any comments or questions, please email firstname.lastname@example.org.