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Market volatility over the past few years
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and rising interest rates have pushed
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many investors to the safety of cash.
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But the time for elevated cash rates
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may be coming to an end.
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With bond yields at decades highs,
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is it time to put that cash to work
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with bond ETFs?
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Historically, the market tends to price in rate actions
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before central banks, like the Federal Reserve,
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even make a move.
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A pivot to rate cuts from the central banks
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later this year is still being debated,
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but current yield levels may mean
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an opportunity in fixed income.
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This means investors who wait
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for a definitive signal on rate cuts
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may miss the chance to lock in higher yields.
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Today, those yields are higher
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than they were two decades ago.
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Investors are recognizing
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this and turning to bonds:
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2023 global bond ETFs notched a record
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$333 billion (USD) in inflows.
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Even with those record inflows,
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investors are still significantly
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underweight to fixed income.
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They have an average of 19% allocation,
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lower than the 24% reported in March 2020,
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and significantly underweight
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compared to the historical 40% benchmark.
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For investors considering bonds again,
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we believe bond ETFs can be a tool of choice,
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as bond ETFs can provide granularity,
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efficiency and versatility when allocating
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fixed income exposure to portfolios.
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The Bottom Line is that
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instead of trying to time the markets,
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investors have an opportunity to retool
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and rebalance portfolios with bond ETFs
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ahead of central bank policy changes.
Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
An investment in fixed income funds is not equivalent to and involves risks not associated with an investment in cash.
Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments.
Buying and selling shares of ETFs may result in brokerage commissions. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.
Diversification and asset allocation may not protect against market risk or loss of principal.
Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results.
This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular.
This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change.
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