How defined-maturity bond funds may help with credit market headwinds

With defined-maturity ETFs, investors may be able to mitigate market noise

Time to read: 3 minutes

Credit investors faced many headwinds in 2018 as financial conditions tightened, foreign demand faded, and spreads widened. Despite tailwinds from a booming economy and strong earnings growth, most credit sectors saw negative total returns. Today, many challenges remain, and the growth tailwind may be fading. But there is a certain type of fixed income strategy that can help mitigate the effects of market noise and may help investors pinpoint more attractive opportunities — defined maturity bond funds.

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Low Volatility is the equity factor winner for 2018

In the fourth quarter, Dividend Yield was also a strong competitor

Nick KalivasTime to read: 5 min

The fourth quarter of 2018 was exceedingly tough for US equities, with no gains to be found in any of the indexes tracked by our quarterly factor scorecard. And yet, certain factors — namely Low Volatility and Dividend Yield — were able to significantly cushion the blow suffered by the broad market. While the S&P 500 Index lost 13.52% in the quarter, the S&P 500 Low Volatility Index fell just 5.22%, and the S&P 500 Low Volatility High Dividend Index fell just 6.77%.

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US/China trade conflict creates factor opportunities

Low Volatility and Quality offer potential benefits in stressed markets

Time to read: 3 min

In my discussions with clients from around the globe the past few months, I have been presenting the view that the US/China trade conflict will be a long, hard-fought battle that will likely play out over years, not months — and I still believe that despite the nations’ recent agreement made at the G-20 meeting. If the trade dispute indeed persists, the disruption is likely to weigh on economic growth rates, and equity markets are likely to continue to exhibit higher-than-average levels of volatility. In this scenario, I believe the Low Volatility and Quality equity factors may be especially attractive.

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Has the market been deFANGed?

Familiar growth names have led during the market’s rise — and its fall. So what may come next?

Time to read: 3 min

Investors have been predicting the end of the current bull market for years, but it’s continued to age well. From 2009 through 2017, the total return of the S&P 500 Index was positive every year.1 And even after a volatile autumn, the index was still in the green for 2018 as November came to a close. But there’s one month left to go in the year, and volatility has recently increased among the FANG stocks (Facebook, Amazon, Netflix and Google/Alphabet2). This has led to investor concerns as these stocks have led the market on the upside and the downside. So is this finally the end of the bull market? I believe the recent FANG underperformance has less to do with the companies themselves, and more to do with the overall macro environment. With no clear case for continued underperformance, I expect these companies to recover from the recent selloff.

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During market drops, the Low Volatility factor has outperformed

Lowering ‘down capture’ can help ease the impact of dramatic market swings

Nick KalivasTime to read: 2 min

In 2017, the S&P 500 Index did not experience any corrections greater than 5%. So far in 2018, there have been three such market drops. So which year represents the more typical investor experience? History shows us that the relative calm of 2017 was an outlier, and that losses and volatility are recurring events that investors should be prepared for.

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Managing interest rate risk with bond ladders

Defined maturity ETFs can help investors build diversified bond ladders

Time to read: 3 min

For the first time in 12 years, investors are forced to wrestle with the challenge of navigating a multi-year upward trend in interest rates at both the short and long end of the bond universe. Bond laddering is a timeless strategy used by generations of investors to help manage the risks associated with future changes in market interest rates. But bond laddering has become markedly more difficult to implement in the decade since the financial crisis. In this blog, I explain the potential benefits of bond laddering, and tools that can help with the difficulties.

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