{"id":58722,"date":"2023-06-27T06:09:14","date_gmt":"2023-06-27T10:09:14","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=58722"},"modified":"2023-06-28T15:17:53","modified_gmt":"2023-06-28T19:17:53","slug":"4-assets-to-hide-while-investors-combat-the-chances-of-a-recession","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2023\/06\/4-assets-to-hide-while-investors-combat-the-chances-of-a-recession\/","title":{"rendered":"4 Assets to Hide While Investors Combat the Chances of a Recession"},"content":{"rendered":"<p>With the resolution of the debt-ceiling crisis and an appreciable moderation of inflation from its decades-high levels around this time last year, an exuberant market was optimistic about a much-coveted \u201csoft-landing\u201d and seemed to have priced in a pause in interest rate hikes by the Federal Reserve.<\/p>\n<p>Moreover, with <a href=\"https:\/\/www.ino.com\/blog\/2023\/06\/is-ai-fueling-the-next-tech-bubble-5-stocks-to-watch\/#.ZIbVXnZBy1s\" target=\"_blank\" rel=\"noopener\">Artificial Intelligence emerging as the next big thing<\/a>, the optimistic outlook for semiconductor and technology stocks kept sentiments buoyant on Wall Street.<\/p>\n<p>After ten interest-rate hikes in about a year to take the Fed funds rate to a target range of 5% to 5.25%, Jerome Powell and the FOMC announced a much-awaited pause. However, this came with a projection (and caveat) of two additional quarter-percentage point hikes before the end of the year as the Central Bank remains determined to bring inflation down to its target of 2%.<\/p>\n<p>While the labor market has remained persistently tight amid an economic resilience that has largely exceeded expectations, signs of softness have begun to emerge as increased borrowing costs have kept the demand in check and hurt supplies by making growth more expensive to finance.<br \/>\nSecondly, rising interest rates have made servicing debt expensive not just for individuals and businesses but for sovereign nations as well. Back-to-back global crises have aggravated public debt burdens accrued by developing nations in recent years and have triggered Ghana, Chad, Ethiopia, and Zambia to seek debt treatment under the Common Framework.<\/p>\n<p>With the Bank of England outpacing its peers with half percentage point interest-rate hike and Turkish Central Bank also getting in on the act in a departure from its earlier policy, the \u2018hawkish pause\u2019 by the Federal Reserve has increased misgivings that the central banks might overcook it with rate hikes.<\/p>\n<p>Such fears had already materialized earlier this year with the recent bank failures on both sides of the Atlantic when banks across the board suffered steep markdowns of their long-dated bonds and loans while holding on to deposits became more expensive.<br \/>\nTreasury Secretary Janet Yellen also echoed these concerns on the sidelines of a conference in Paris, \u201cI\u2019m not going to say it\u2019s not a risk, because the Fed is tightening policy.\u201d<\/p>\n<p>With the latest data also suggesting that central-bank rate hikes are causing a global economic cooldown, investors are understandably spooked and seeking safety in fixed-income instruments and precious metals.<\/p>\n<p>With the 10-Year Treasury note yield hovering around 3.5% after recently topping 4% for the first time since 2008, it\u2019s not difficult to understand investors\u2019 rekindled love for bonds.<\/p>\n<p>Also, gold has emerged stronger than ever as the safe-haven asset to make wealth resistant to corrosion from black swans and fat tails arising from climate change, the unrestricted rise of Artificial Intelligence, and the proliferation of weapons of mass destruction.<br \/>\nIn the above context, these four ETFs could gain from market instability and rising rates.<\/p>\n<p><a href=\"https:\/\/quotes.ino.com\/search\/?s=PACF_GDX\" target=\"_blank\" rel=\"noopener\">VanEck Vectors Gold Miners ETF (GDX)<\/a><\/p>\n<p>GDX is managed by Van Eck Associates Corporation. It offers exposure to some of the largest gold mining companies in the world. Since their stocks have a strong correlation to prevailing gold prices, the ETF provides indirect exposure to gold prices.<br \/>\nAlthough aggressive interest-rate hikes by the Federal Reserve have increased the strength of the U.S. dollar, that has not been able to diminish the luster of gold.<\/p>\n<p>Although the yellow metal has unusually been negatively correlated to the global reserve currency, the demand for gold from central banks worldwide totaled 1,136 tonnes in 2022.<\/p>\n<p>GDX has an expense ratio of 0.51%. It pays $0.48 annually as dividends, and its payouts have grown at a 22% CAGR over the past five years. It saw a net inflow of $42.96 million over the past year.<\/p>\n<p>GDX has about $11.98 billion in assets under management (AUM). The ETF\u2019s top holding is Newmont Corporation (NEM) which has a 10.27% weighting in the fund. It is followed by Barrick Gold Corporation (GOLD) at 8.84% and Franco-Nevada Corporation (FNV) at 8.15%. The fund has 52 holdings, with 64.44% of its assets concentrated in the top 10 holdings.<\/p>\n<p><a href=\"https:\/\/quotes.ino.com\/charting\/?s=PACF_TIP\" target=\"_blank\" rel=\"noopener\">iShares TIPS Bond ETF (TIP)<\/a><\/p>\n<p>TIP is managed by BlackRock Fund Advisors. The ETF invests in dollar-denominated fixed-income instruments issued by the U.S. government. The fund seeks to protect asset values against an uptick in inflation by adjusting the principal accordingly.<br \/>\nBy providing unmatched liquidity, TIP appeals as a tactical play when concerns about inflationary pressures intensify or may be used as a core holding in a long-term buy-and-hold portfolio.<\/p>\n<p>TIP has an expense ratio of 0.19%, compared to the category average of 0.23%. The fund pays $4.65 annually as dividends, and dividend payouts have grown at a 10.5% CAGR over the past five years. It has seen a net inflow of $5.7 billion over the past three years.<br \/>\nTIP has about $21.58 billion in AUM. The ETF\u2019s 51 holdings are U.S. government securities of varying maturities, with 36.9% of its assets concentrated in the top 10 holdings.<\/p>\n<p><a href=\"https:\/\/quotes.ino.com\/charting\/?s=NASDAQ_BNDX\" target=\"_blank\" rel=\"noopener\">Vanguard Total International Bond ETF (BNDX)<\/a><\/p>\n<p>BNDX has been launched and is managed by The Vanguard Group, Inc. The ETF offers broad market-like exposure to investment-grade bonds denominated in foreign currencies.<\/p>\n<p>In addition to the benefits of geographical diversification, the fund is hedged to limit the impact of non-U.S. currency fluctuations on performance through the use of non-deliverable forward contracts.<\/p>\n<p>BNDX has an expense ratio of 0.07%, compared to the category average of 0.42%. The fund pays $0.85 annually as dividends. It has seen net inflows of $464.59 million and $1.67 billion over the past month and three months, respectively.<\/p>\n<p>BNDX has about $49.83 billion in AUM. Most of the ETF\u2019s 6966 diverse holdings are in sovereign bonds with an AA rating or better. With just 3.77% of its assets concentrated in the top 10 holdings, concentration risks have also been largely mitigated.<\/p>\n<p><a href=\"https:\/\/quotes.ino.com\/charting\/?s=PACF_AGG\" target=\"_blank\" rel=\"noopener\">iShares Core U.S. Aggregate Bond ETF (AGG)<\/a><\/p>\n<p>AGG is managed by BlackRock Fund Advisors. It offers broad exposure to investment grade and dollar-denominated U.S. treasury, government-related and corporate bonds, and other fixed-income instruments with at least one-year maturities.<\/p>\n<p>With such a low-risk profile, AGG has strategic utility for investors seeking to construct a balanced, long-term portfolio and tactical utility as a potentially attractive safe haven for those wishing to pull money out of equity markets temporarily.<\/p>\n<p>AGG has an expense ratio of 0.03%, compared to the category average of 0.42%. The fund pays $2.71 annually as dividends. It has seen net inflows of $1.74 billion and $4.44 billion over the past month and three months, respectively.<\/p>\n<p>AGG has about $91.62 billion in AUM. The fund is sufficiently diversified with 11,027 holdings, with 8.12% of its assets in the top 10 holdings.<\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>With the resolution of the debt-ceiling crisis and an appreciable moderation of inflation from its decades-high levels around this time last year, an exuberant market was optimistic about a much-coveted \u201csoft-landing\u201d and seemed to have priced in a pause in interest rate hikes by the Federal Reserve. Moreover, with Artificial Intelligence emerging as the next [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":41,"featured_media":54694,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[31505,32195,30908,8623],"class_list":["post-58722","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-ishares-core-u-s-aggregate-bond-etf-agg","tag-ishares-tips-bond-etf-tip","tag-vaneck-vectors-gold-miners-etf-gdx","tag-vanguard-total-international-bond-etf-bndx"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>4 Assets to Hide While Investors Combat the Chances of a Recession - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"description\" content=\"In this article, we look at a few safe havens for investors looking to protect their wealth from the risk of a recession.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ino.com\/blog\/2023\/06\/4-assets-to-hide-while-investors-combat-the-chances-of-a-recession\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"4 Assets to Hide While Investors Combat the Chances of a Recession - 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