What’s your picks for an ETF in a rising interest rate environment? I would think simply an index ETF that follows the DJ or S&P.
I think an S&P or DJ ETF would not be the best strategy to capture the effect of rising rates. If your goal is to play rising rates, maybe a short bond ETF like PST?
Would you say a less risky play would be the index though? (at least less risky than a short bond?)
I would say look into CORN. Its a new ETF that exclusivley tracks commodities. In a rising interest rate environment (ie, inflation), exposure to commodities (gold, silver, copper, corn, etc) are good hedges…
CFAcountry Wrote: ------------------------------------------------------- > What’s your picks for an ETF in a rising interest > rate environment? I would think simply an index > ETF that follows the DJ or S&P. What is the objective of the investment (hedge, appreciation, income)?
sounds like a hedge
Would it sound right to put this money into a short bond etf and once interest rates rise enough (pretty vague i know) put the money into a long bond fund or ETF?
Borrow money (short bonds) and party.
silver has more than doubled in price of the last year
rates will likely begin to rise once there gets to be some hints of inflation and the economy gaining traction. given an inflationary environment and huge hits to supply (argentina, australia, a recovering russia) we could see a perfect storm scenario developing in the ags and softs space. the best commodity plays from a relative strength perspective are cotton (BAL), sugar (SGG), coffee (KO), and wheat.
Shorting a bond ETF is expensive. Remember that all the coupons are essentially negative carry…bond prices need to selloff at least as much as the coupon return just to break even. If you expect bonds to selloff in the near term, ok short bond fund. Because you expect gradually rising rates? No way. Gradually rising rates is already priced into security prices, so your play can’t be simply on “rising rates” but rising rates faster than priced into the foward curve.