“Defensive Twist”: BlackRock ETF Investors in Troubled Times | News

Markets between inflation and recession
BlackRock recommends funds focused on short-term fixed income securities
Expected higher prices for consistent income

The last few months have been a roller coaster for investors from ETF (Exchange Traded Fund) funds. Markets fluctuated strongly, but since the beginning of the year there has been a downward trend in some cases so marked that important indices have already entered Brenmarket territory. ETF investors feel this as well, as index funds traded on stock market barometers such as the S&P 500 or DAX 1: 1. If the overall market falls, ETF investments that are classified as less risky also decline. However, there are ETF products that are worth looking at, even in the current market environment, believes Gargi Chaudhuri, head of iShares investment strategy at the giant BlackRock fund.

Defensive turn in the portfolio

In a telephone interview with MarketWatch, the expert pointed out that BlackRock currently prefers funds that focus on short-term fixed income as well as equity ETFs that invest in “high-quality companies with strong balance sheets and price power.” Investors would be better able to deal with the economic downturn if they had “some defensive return in their portfolio”. It also advises investors to choose “minimum volatility”.

Expected higher prices for consistent income

Over the past few weeks, markets have struggled with rising inflation, and in particular with concerns about a significant tightening Monetary policy the US Federal Reserve has lost a lot. Chaudhuri believes it is not justified, however: “Ultimately, I think the Fed will take a less aggressive stance in its policy than what is currently priced in the market,” Chaudhuri said in a telephone interview. “If that happens,” she said, “front-end interest rates are likely to fall.” This should lead to higher prices for fixed-income short-term securities, which would be beneficial for debt holders, especially for one-year to three-year bonds, the expert said.

The Fed makes a big rate hike

In fact, the US Federal Reserve ventured on a large interest rate hike last Wednesday and raised its key interest rate by 0.75 percentage points. The market had been afraid of such a step before, and some experts even expected that the rate hike by currency holders could be even greater. Fed chairman Jerome Powell stressed during the interest rate adjustment process that such a high interest rate step was “naturally unusual”, but pointed out that another 0.5 or 0.75 percentage point interest rate hike is also under consideration at the end of July .

While earlier it seemed that the hike had already been priced in, the stock markets reacted late, sometimes with huge losses. The DAX lost more than three percent the day after the Fed’s decision, the leading US Dow Jones index fell 2.4 percent, while the NASDAQ Composite stock index lost four percent.

However, Chaudhuri advises investors to pay attention to the front end of the yield curve “when the Fed starts to tighten quantitatively.” As part of a quantitative tightening, US currency holders plan to reduce the size of their balance sheets by allowing their bonds to expire at maturity. Government bond holdings are expected to decline by approximately $ 700 million over the next twelve months. “These government bonds need to find a different home and the resulting supply pressure should drive profitability up,” an analyst said in a note to investors quoted by MarketWatch.

Editors of finanzen.net

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