Ready For Recession? Fund Managers Advocate Shift To Treasury, Mortgage Bonds
Portfolio Pulse from Natan Ponieman
Fund managers are recommending a shift from cash and money market funds to Treasury and mortgage bonds, citing decreasing inflation and potential economic slowdown. Money market fund assets have reached a record $5.73 trillion, but with the Federal Reserve's interest rate hikes potentially nearing an end, bonds are becoming more attractive. The two-year Treasury bond yields 4.89%, while the 5- and 10-year bonds yield 4.44%. Economists predict either an imminent recession or a soft-landing scenario. Mortgage bonds are also suggested as a good investment if interest rates decrease, with increased regulation making them safer than in 2008.
November 21, 2023 | 9:29 pm
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POSITIVE IMPACT
iShares Core US Aggregate Bond ETF (AGG) is recommended by fund managers for broad bond market exposure as investors shift from cash to bonds due to a potential economic slowdown and lower inflation.
The recommendation by fund managers to shift to bonds could lead to increased inflows into AGG, potentially raising its price in the short term.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
Vanguard Total Bond Market ETF (BND) is highlighted as a suitable investment for those looking to gain exposure to the bond market, with a shift in investment strategy recommended by fund managers.
BND could see a positive impact as investors looking for safer assets may increase their holdings in response to fund managers' advice, potentially driving up the ETF's price.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
iShares MBS ETF (MBB) is recommended for investment in mortgage-backed securities, which could benefit from a decrease in interest rates as predicted by fund managers.
MBB could experience a short-term uplift if investors heed fund managers' advice and reallocate cash to mortgage bonds, especially if interest rates decline.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
POSITIVE IMPACT
Vanguard Mortgage-Backed Securities ETF (VMBS) is identified as a potential investment for those seeking exposure to mortgage bonds, which are expected to perform well if interest rates fall.
VMBS stands to gain in the short term as investors may increase their positions in mortgage-backed securities, following fund managers' recommendations and anticipating lower interest rates.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70