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Fueled by accommodative monetary policies and additional fiscal stimulus, higher inflation expectations and upbeat growth prospects continue to put upward pressure on interest rates. Going forward, a higher rate reflationary regime could upend what has worked in the standard 60/40 portfolio over the past decade (long duration bonds and growth stocks).
Michael Arone, CFA, Chief Investment Strategist, US SPDR Business and Matthew Bartolini, CFA, Head of SPDR Americas Research sit down to discuss what the latest market dynamics impacting the recovery mean for portfolios.
To help portfolios remain properly diversified and meet their return objectives in this new regime, investors could consider replacing traditional bonds and growth stocks with growth-sensitive bonds and rate-sensitive stocks in the portfolio’s core.
Growth-Sensitive Bonds:
Prior to February 26, 2021, the SPDR Blackstone Senior Loan ETF was known as the SPDR Blackstone / GSO Senior Loan ETF.
Rate-Sensitive Equities:
The views expressed are the views of Michael Arone and Matthew Bartolini as of March 24, 2021 and are subject to change based on market and other conditions. The opinions expressed may differ from those with different investment philosophies. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected
Investing involves risk including the risk of loss of principal.
Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.
Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.
This communication is not intended to be an investment recommendation or investment advice and should not be relied upon as such.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s express written consent.
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