Bond ETFs get active

A new type of exchange-traded fund will provide a useful way for bond investors to mitigate risk, says David Stevenson.

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Federal Reserve boss Jerome Powell is making bonds less appealing
(Image credit: 2018 Getty Images)

As US interest rates start to rise, bonds as an asset class look unappealing. The US Federal Funds rate (the key short-term rate) is already at 1.75%, and I think it will peak at around 3.5%. Coincidentally, as a rule of thumb, most economists reckon that central banks need to target a rate cut of 3.5 percentage points to stave off a recession which is probably no more than 12 to 24 months away. So at that point, we'd expect US rates to head straight back to near 0%.

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David C. Stevenson
Contributor

David Stevenson has been writing the Financial Times Adventurous Investor column for nearly 15 years and is also a regular columnist for Citywire. He writes his own widely read Adventurous Investor SubStack newsletter at davidstevenson.substack.com

David has also had a successful career as a media entrepreneur setting up the big European fintech news and event outfit www.altfi.com as well as www.etfstream.com in the asset management space. 

Before that, he was a founding partner in the Rocket Science Group, a successful corporate comms business. 

David has also written a number of books on investing, funds, ETFs, and stock picking and is currently a non-executive director on a number of stockmarket-listed funds including Gresham House Energy Storage and the Aurora Investment Trust. 

In what remains of his spare time he is a presiding justice on the Southampton magistrates bench.