Now may be the time to reconsider popular portfolio strategies in a lower interest rate environment.
this Fed cuts interest rates by half Wednesday marked the first time in more than four years that the benchmark interest rate was lowered. VanEck CEO Jan van Eck said investors should start thinking about how the changing macro environment will affect their investments in the coming year.
“Investors should look at their equity books and ask themselves, ‘How should I set this up to survive next year’s cycle?'” he told CNBC.ETF Edge“Last week. “Just buying the S&P is a dangerous strategy right now.
this S&P 500 Index Ended the week up 1.4%, while small-cap stocks Russell 2000 It ended up rising 2.1%. Jon Meyer of J.P. Morgan Asset Management said the outperformance of the latter index is likely to continue as interest rates fall.
“We will be in an easing cycle, so small-cap companies will benefit from lower rates,” said the firm’s chief ETF strategist.
But it’s not just stock strategies that experts recommend revisiting. Investors may also start reducing their cash holdings. According to statistics, although the average return of the 100 largest money market funds is still above 5% Crane data As of Friday, Meyer expected some of the money to flow back into bonds.
“The fixed income space is experiencing a lot of flows right now because of the interest rate environment, and that’s likely to continue,” he said. “About six trillion dollars of money market funds, most of which will go into long-term fixed income, or some “Other Equity Areas.”
With interest rates finally starting to fall, Van Eyck pointed to the federal deficit as the next potential challenge for markets. He sees a case for sticking with some popular portfolio hedges amid a broader repositioning.
“Can the government continue to stimulate the economy and spend far more than it takes in tax revenue? Our answer is that it will create a lot of uncertainty. gold and Bitcoin It’s a good hedge,” Van Eyck said.
