Bonds issued by embattled U.S. energy companies with sub-investment-grade ratings saw a major boost Monday after oil prices spiked following Saturday’s attack on Saudi Arabia’s oil production facilities.
The Federal Reserve left borrowing costs unchanged but signaled an openness to cut rates for the first time in more than a decade, amid ongoing trade tensions, moderating job gains and persistently low inflation.
While the Federal Reserve held rates steady Wednesday, investors said evidence is building for a reduction later in the year. The deletion of the pledge by policy makers to stay “patient” before economic data and estimates from eight of 17 members that the Fed funds rate would fall in 2019 supported risk assets including stocks.
So it goes with finding the right recipe for bonds to place in a portfolio. For while the word “bond” may conjure images of Aunt Bessie handing over a U.S. savings bond with all the earning power of a prune, the truth is that these investments come in as many flavors as there are allocation recipes. And trying to find those ideal bonds, let alone the ideal blend, can prove one heck of a daunting task for an investor.
As market headwinds from a trade war impasse buried the capital markets in volatility during the month of May, a de-risking occurred in funds specializing in high yield like The High Yield ETF (NYSEArca: HYLD). The fund, however, adjusted its strategy by making a move towards quality debt holdings as investors sought more fixed income exposure during this volatile swing.
The Federal Open Market Committee meets on June 18 and 19, with a new Summary of Economic Projections to be released, and, of course, a press conference with Chair Jerome Powell. When the panel last convened, the trade issue had yet to evolve, “but we still have yet to see any material deterioration in economic fundamentals,” said Greg McBride, chief financial analyst at Bankrate.com. “Absent that, how do FOMC participants change the dot plot to forecast a reduction in interest rates, which no one did going out through 2021 when last released in March?"
Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus and Summary Prospectus, which may be obtained by visiting https://hyldetf.com/documents. Read the prospectus and Summary Prospectus carefully before investing.
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An investment in the Fund is subject to risk, including the possible loss of principal amount invested. Non-diversification exposes the Fund to greater market risk than if its assets were diversified among a greater number of issuers and/or sectors. High yield, lower rated bonds involve a greater degree of risk than investment grade bonds in return for higher yield potential. As such, securities rated below investment grade generally entail greater credit, market, issuer and liquidity risk than investment grade securities. Interest rate risk occurs when interest rates rise as bond prices usually fall This Fund may not be suitable for all investors.
Shares are bought and sold at market price (closing price) not net asset value (NAV) and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00pm Eastern Time (when NAV is normally determined) and do not represent the return you would receive if you traded at other times.