Displaying items by tag: rates

(New York)

Not only did the stock market fall 3-4% yesterday, but something very unusual happened alongside it—yields rose. Historically speaking, it is rare for yields to rise when there is a big stock selloff, as investor generally flee to the safety of Treasuries. Selloffs can portend economic weakness to come, which makes bonds seem more attractive.

FINSUM: This is quite a worrying development and is reflective of the current environment. No one can get comfort from the “safe haven” of Treasuries because it seems very likely yields will keep rising on the back of the strong economy. In other words, there is no place to hide (other than in hedged investments).

(New York)

With rates rising and yields finally responding in a big way, you may have been wondering which ETFs tend to perform well in such periods. With that in mind, here is a list of the best performing ETFs in periods of rising rates (since 2008). The stats are from thirty day periods of rising rates, which have occurred 18 times since 2008. The best four are: VanEck Vector Oil Services ETF (6.53% average gain), the SPDR S&P Regional Banking ETF (4.9%), the United States Oil Fund ETF (4.54%), and the SPDR S&P Oil & Gas Exploration & Production ETF (3%).

FINSUM: Oil and banking, not really a surprise, but certainly a good reminder for investors. The worst performing funds in the same period tended to be gold funds.

(New York)

If rising rates weren’t scaring you a week ago, they surely are now, as the weight of rate rises has finally hit markets in a big way. With that said, here are some ETFs to help offset or benefit from rate hikes. Vanguard’s Short-Term Bond ETF (BSV) is a good bet, with an expense ratio of just 0.07% and a yield of about 3%. Another interesting one is the Invesco Senior Loan ETF (BKLN). The loans underlying this fund have their yields reset every 30 to 90 days, so your payout keeps rising with the market. The fund yields 4.19% and costs 0.65%. Lastly, take a look at the Fidelity’s Dividend ETF for Rising Rates (FDRR), which focuses on dividend growth stocks, a group that has historically performed well during periods of rising rates.

FINSUM: This a nice group of options, all of which are quite different from each other.

(Houston)

You want to know an asset class that has performed well in periods of rising rates? Take a look at oil. In periods of quickly rising rates and yields, oil and oil-related stocks have done very well. In fact, Van Eck’s Vectors Oil Service ETF (OIH) has been the best performing fund of its type in such periods. “Shares in the VanEck Vectors Oil Services ETF saw a 6.5 percent boost over the month when rates jumped, while shares of the United States Oil Fund ETF ran up 4.5 percent”, according to Kensho.

FINSUM: Oil and banks tend to do well in periods of rising rates. The former because rising rates usually mean a strengthening economy, and the latter because of both an improving economy, but also wider net interest margins.

(New York)

Most investors are worried about the potential impact of the trade war, not to mention rising rates and yields. However, there is one stock that should shine through all of it—Weight Watchers (not what you were expecting, right? Us either). The company, now called WW, seems poised to gain. As one financial reporter puts it “This is a subscription-heavy company relying on decent employment rates, a country in need of wellness advice, and a charismatic spokesperson (Oprah!) trading at a below-growth multiple”. The company is looking to improve its revenue by a quarter by 2020 to $2 bn, 80% of which is subscription-based.

FINSUM: There does not seem to be any reason that WW would be at the mercy of many of the forces hurting markets right now. It could be a good bet.