AND F Tendencies’ CEO Tom Lydon talks about iShares TIPS Bind AND F (POINT ) on this week AND F from the podcast of the week with Chuck Jaffe on the MoneyLife Show.
Lydon begins by describing the novelty of the inflationary environment we currently find ourselves in with regard to ETFs and how inflation remains a major concern for advisers through to 2022. Add to this the direction of the Fed on a more aggressive cut and interest rate hikes in the second half of the year, and it all amounts to a tough time for the future of the bond space.
Rising interest rates have a negative impact on bonds because new bonds opened with higher rates decrease the value of previous bonds at lower rates. This means that an investor who holds a bond in their portfolio before interest rates rise would see that value decrease as rates rise, unless they intend to hold the bond until. at the due date. For retirees or those looking to retire soon, this becomes a big concern that POINT seeks to answer.
âHere’s an inflation-indexed product, and there’s an inflation-protected treasury that is issued by the U.S. treasury that tracks inflation, and you can actually buy it with the idea that it is indexed to inflation, âexplains Lydon.
TIPSTied funds have seen a huge boom this year, bringing in nearly $ 30 billion in new money as advisers and investors seek inflationary hedges. POINT in particular was above its 200-day moving average for much of the year, before briefly plunging with the Fed’s announcement of interest rate hikes next year, and is again traced back.
Bonds in general are falling, which can complicate the task of the typical asset allocation portfolio; the iShares Core US Aggregate Bond AND F (AGG ), the general AND F used to track the bond space, is currently down 4% YTD. For investors with a 60/40 portfolio, the bond allocation segment has become increasingly difficult to find performance. Many investors are looking for alternatives, such as money market funds – there is currently $ 8 trillion in these types of funds – or stocks to try and find returns.
Option-layered ETFs have also become popular as the bond space has weakened, with funds such as the JPMorgan Equity Prime Income AND F (JEPI) offering the potential for high returns as an alternative.
âThe message is that 2022 will be a tough year for fixed income, and yes you can follow the trends, but more importantly for people who are used to holding fixed income allocations for a long time. prolonged period and obtain returns, although they have diminished, that is for sure. It may not be like that anymore, âexplains Lydon.
POINT is an ideal fund for advisors and investors who believe inflation will persist over the next two years and negatively impact fixed income securities. It’s a AND F which gives access to the house TIPS market all in a single fund and is up 5.11% YTD.
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