CNBC’s Edge ETF is dedicated to the fastest developing investment trend right now: so-called ETFs . Every Monday, Bob Pisani will join a panel of top market players to deliver educational and practical advice to help you build your best portfolio.
The CEO of ETF Trends, Tom Lydon, is in charge of analyzing the increase in interest rates and the different bond ETFs as well as funds BTC with Grayscale CEO Michael SonnenShein and Bitwise CIO Matt Hougan on this week’s “ETF Edge,” shown live on CNBC by Bob Pisani of ETF Exchange in Florida.
Increase in interest rates
Lydon begins by discussing advisers’ agonizing concerns about inflation and rising interest rates, which outweigh even their concerns about geopolitical insecurity, thanks to concerns about Fed toughness weighing on bonds and bond ETFs .
A balanced 60/40 portfolio split between stocks and bonds has long been considered the traditional way to invest, but in today’s financial environment interest rates are on the rise, advisors are beginning to question that percentage set for bonds.
Advisors “are not as concerned about volatility within the stock market; in fact, the amounts show that they continue to buy on dips, but, as noted, inflation and Rising interest rates is a real concern , and the last time we saw this was in 1970,” says Lydon.
In Pisani’s view, bond ETFs continue to bleed as investors and advisers flee the space on rising interest rates, with several of the largest bond ETFs hitting new lows.
Money is very active
So where does the money go? Lydon reveals that money is very active and commodities have been placed at an unprecedented equilibrium , and in these 4 months of the year more flows have been seen to funds from fixed income commodities. Investors still keep their money at home instead of investing.
“There are 5 trillion dollars allocated to funds within the money market, there are 15 trillion dollars within bank accounts”
People, and mainly advisers, and they express this to us, would prefer to book them with a low duration, says Lydon. “Currently there is a lot of distrust in fixed income.”
Advisors are leaning heavily toward transforming their portfolios through commodity, interest strategies and alternative strategies such as option additions to seek new income.
The so-called portfolio reallocations that are happening as investors and advisers move away from mainstream bond investments mean that there is now a huge amount of money active and flowing.
