<\/button><\/span><\/span><\/span> hitting its highest level since 2023 on Wednesday, what’s giving investors pause isn’t going away.<\/p>\nBetween planned Treasury buybacks<\/a> and the Federal Reserve’s latest announcement <\/a>signaling a possible rate hike that puts the agency at odds with President Donald Trump’s desires, many bond owners are scratching their heads about what’s next. This comes amid broader inflation<\/a> concerns weighing on bondholders, a roughly $2 trillion federal deficit, and over $40 trillion in government debt<\/a> that doesn’t show signs of easing.\u00a0<\/p>\n“Tuning out the noise is one of the hardest things for anyone to do,” said Ian Toner, partner and head of investments in the institutional consulting practice at New York-based Cerity Partners.\u00a0Nonetheless, he cautions investors who are considering moving money based on headlines to think hard about whether something has fundamentally changed in the economy or the market on a long-term basis or whether they’re reacting to short-term news flow. “Most news is short-term, and most portfolios should be long-term. That intersection is emotionally hard, but really important to drive successful results,” he said.<\/p>\n
Financial advisors and investment strategists say there are plenty of options for investors to ride out bond market uncertainty rather than rush into potentially bad decisions.<\/p>\n
Yields are higher across the curve, and despite Trump administration attempts<\/a> to project calm, it can spook the markets. But for buy-and-hold investors, higher yields can be a good thing. “To me, that’s a positive sign for future returns because the yields are now higher for the bond market, generally speaking,” said Marta Norton, chief investment strategist at Denver-based Empower. “I do not agree that bonds are dead. They may not have the tailwinds that they had in past decades, but they still have a role for investors and portfolios,” Norton said.<\/p>\nDon’t run from bonds, diversify fixed-income maturities<\/h3>\n As long as an investor has a diversified plan in the fixed-income space, most of the uncertainty will likely stabilize and become much clearer, Toner said.\u00a0A diversified portfolio can include a broad market ETF such as the iShares Core U.S. Aggregate Bond ETF (AGG<\/a>), a short-duration ETF, treasury inflation-protected securities (also known as TIPS), corporate debt and some floating-rate debt, strategists said. <\/p>\nTo be sure, the AGG has suffered a massive drawdown<\/a>, experiencing steep losses in the period since 2020 even with the bond coupon reinvested. That is because when the near-zero interest rate environment of the pandemic reversed, sending yields steadily higher, it punished bond prices. The AGG is also heavily concentrated in treasuries, at roughly 45%, which could continue to be a headwind<\/a>. But with yields as high as they are now, the AGG does have what is known as a much greater “cushion” against price volatility<\/a> in bonds than it did when rates were near zero. <\/p>\nSome high-profile figures in the market have warned that having any treasuries’ duration exposure at all is a mistake<\/a>, with the uncertainty related to government debt and Fed policy in the fight against inflation<\/a> likely to keep pushing rates up at least in the short-term. More investors are turning toward ultra-short bond ETFs,<\/a> which saw inflows of $12.8 billion in July, according to Morningstar Direct. These funds add slightly more yield than money market ETFs or mutual funds, with only a bit more risk, according to financial strategists.\u00a0Another option within the short-term bond ETF universe is the PIMCO Low Duration Fund ( PTLDX<\/a>), which has a one- to three-year duration range and an adjusted expense ratio of 0.46%.<\/p>\n<\/div>\n