In online trading, make sure you understand the path of the market and design your strategy accordingly. The right broker dealer can give you the required insight to make the right decisions.
Second Quarter Market Trends Point to ETFs
The market is beginning to exhibit some strength and stability in the second quarter, though you do find some volatility. We find the S&P 500 looking to stay in the green. This was the period of many important changes such as the oil prices rising again and the Chinese economy undergoing a subtle stabilization, though the S&P 500 is still some way off its past success, and it could be that way for the rest of the year. The US economy could finally see some growth in the second quarter though there could be a good deal of volatility ruling the market as well. Factors contributing to this could be Fed rate hikes, November’s US elections and, more imminently, the ‘Brexit’ vote. While the Fed hike is an indication that the US economy is steady, the looming possibility is a stock market crash because of concerns regarding shortage in cheap money inflows.
In a situation such as this, appropriate trading strategies need to be employed by investors. Since there are fewer chances of a hike in Fed rate, investors can consider money market ETFs such as the SPDR Barclays 1-3 Month T-bill (BIL) and the Guggenheim Enhanced Short Duration Bond (GSY). A Fed rate hike is sure to hit stocks and bonds since jumping yields will bring down bond prices.
Long-term Corporate Bond ETFs
Long-term corporate bond ETFs can also be considered such as the Vanguard Long-Term Corporate Bond ETF (VCLT) so you can receive higher yields than what you could expect from treasuries. According to Goldman Sachs, its 10-year year-end yield could be down to 2.4% from the 2.75% that had been projected in Q1. Morgan Stanley projects a 1.75% 10-year yield, which is down from 2.7% projected at the beginning of the year. Bank of America Merrill Lynch also deflated its forecast to 2% from the Q1 prediction of 2.65%. Hence the drive to secure higher yield is to be expected. It is important to hone in on investment-grade bonds since corporate bonds are riskier by nature. VCLT has an annual yield of 4.30% as of May 18.
Oil demand is in for a recovery, combined with shrinking supply. Investors can therefore look towards oil with high-yield bond ETFs such as Peritus High Yield ETF (HYLD). Energy companies in the US are closely associated to these high-yield bonds.
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