Over the next six months, investors might want to think about preparing for a worse performance in the stock market.
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Roger Hallam of Vanguard asserts that in this climate, it is wise for long-term investors to have adequate exposure to fixed income.
“We expect growth to slow in the second half of this year,” the company’s global head of rates stated on Monday on CNBC’s “ETF Edge.”
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According to Hallam, as inflation increases, the job market will continue to progressively cool. In order to provide insurance, Hallam anticipates that the Fed will eventually emphasize jobs and lower interest rates by the end of this year.
“We think that will provide a tailwind for bonds,” he stated. “So, we’re confident in the outlook for fixed income, and we think… clients should be allocating to fixed income.”
Three U.S. government bond exchange-traded funds are making their debuts this week, with Vanguard trailing behind. The Vanguard Government Securities Active ETF (VGVT) is part of the launch.
According to the company’s prospectus, the new ETF’s largest exposure is to U.S. Treasurys. Beginning 2025 at approximately 4.57%, the benchmark 10-year Treasury note rate has subsequently dropped to about 4.4% as of Tuesday.
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Jay Jacobs of BlackRock, meanwhile, believes that a barbell approach is a good second-half tactic to protect against the risks of an economic slowdown.
“I think we’re still going to see a lot of money that’s been in cash for a long time start to inch their way back into the equity markets,” stated the company’s head of equities ETFs for the U.S. in the same interview.
He anticipates that the risk environment will favor buffer ETFs, which are intended to guard against the downside while still providing some upside return.
According to the company’s website, BlackRock offers six buffer ETFs, one of which is the iShares Large Cap Max Buffer Jun ETF (MAXJ). The fund, which replicates the share price return of the iShares Core S&P 500 ETF, has increased by 5% so far this year.
Recently, our fund MAXJ reset, allowing for a maximum exposure to the S&P of 7% over the course of the following year. For investors who want to return to the markets, a tool like that will be quite popular,” Jacobs stated, adding that investors will probably play offensive and keep moving toward powerful macro themes like artificial intelligence.
Infrastructure is another important group mentioned by Jacobs.
“As we continue to see geopolitics and fragmentation around the world impact markets, I think people are going to be looking at really powerful macro trends like the growth of infrastructure in the United States as a way to place their bets in the equity markets,” Jacobs stated.
Also on CNBC
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Vanguard, Blackrock market experts on what to expect in second half
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Where index fund giant Vanguard is becoming more active in the market
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ETF Edge: Midyear outlooks, active ETFs and Q3 themes
