Consider A Shift To These ETFs As Interest Rates Rise

December 22, 2016

Stronger economic activity can favor corporate bonds over other types of credit.

Investors might consider the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and the PowerShares Fundamental Investment Grade Corporate Bond Portfolio (PFIG) for these allocations.

In response to their perception of building inflationary pressure, the Fed may increase short-term interest rates more persistently and more quickly than consensus expects.

Investors might consider floating-rate ETFs to take advantage of potentially higher short-term interest rates. Examples of the ETFs with this exposure include the PowerShares Senior Loan Portfolio (BKLN), the iShares Floating Rate Bond ETF (FLOT) and the SPDR Blackstone / GSO Senior Loan ETF (SRLN). Since these options invest in floating-rate instruments, they should be able to adjust to higher interest rates without an erosion of principal.

At the time of writing, Stringer Asset Management held PFIG and FLOT among its universe of ETFs included in its suite of ETF Portfolios. SAM is a Memphis, Tennessee third-party investment manager and ETF strategist. Contact SAM at 901-800-2956 or at [email protected]. For a complete list of relevant disclosures, please click here.

 

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