Bonds: Total Market

PIMCO saw the second quarter sell-off in bond funds as investors pulled nearly $30 billion in the last three months. The biggest cause for the sell-off is the rising rate hikes and inflation which may be causing yields to rise and bond prices to fall. Still, analysts say that if interest hikes begin to stabilize then the bond outflows will seize and even reverse into inflows. 

This is the largest sell-off since the start of the pandemic, and investors are concerned a recession is around the corner. PIMCOs shining light are the few funds that it has that are doing okay despite macro headwinds and could prove to be a driving force for inflows when markets stabilize.


Finsum: Bond prices are just too low right now and yields will fall with inflation easing and the fed tightening, but its a matter of it happening soon enough. 

Calling bond prices stubborn would be an understatement, and the bears have been continuing to pull investors out of the bond market in the mass exodus of outflows. The tides could be starting to shift, and the reasons are on opposite ends of the spectrum. Investing yield curves and recession indicators are flashing, which means investors will flock back to the bond market as a safe asset when equities fall. On the other side of things, if inflation is being driven by supply-side factors more than the Fed thinks, then inflation will fall dramatically, and less tapering will be needed to get there. This means bond prices could rise as yields fail to. Broad bond exposure is still a good idea with volatility rising.


Finsum: It’s been rough in the bond market the last few months, but there are economic reasons that could turn around.

Acquisitions and launches are running hot in direct indexing and in an attempt to match rival Fidelity, Charles Schwab announced the launch of their new direct indexing products. The funds will be available starting on April 30th, but unlike Fidelity’s ultra-low initial investment of $5k, Schwab will require a $100,000 minimum. They want their direct index investors to have a better conceptualization of the market and think the minimum will attract this. The launch comes fresh off of tax season and will hopefully drive interest as tax is an advantage of DI. Schwab will concentrate on the tax advantages of their custom offerings as opposed to ESG or other flavors popular with these funds.


Finsum: The timing of this launch could put investors over the hump when it comes to taking advantage of tax-loss harvesting with their DI products. 

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