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Zacks Investment Research senior equity analyst Jared Levy on why investors should consider shifting away from bonds.
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-- this week.
Meanwhile bondholders be where interest rates are heading higher take a look at the ten year treasury yields hovering near -- ten month high.
With higher interest rates bond prices will fall we'll be getting less if you need to sell.
Here with advice for fixed income investors I'm joined by -- -- Zacks investment research.
So -- and figure out talking about what investors should do -- warning them about the risks of bonds what do you make of it.
Well there's two types of people in this world there are people -- own bonds currently at -- telephone bonds Carolina that sounds stupid but I want to focus on the folks -- have bonds right now.
What you need to remember is if if if your own bonds you're not getting any yields.
People who don't bonds have been suffering for a long time yields and you know 12%.
Over periods of ten years -- nothing.
What you're -- -- remember is the Fed is in the market buying forty.
Billion plus dollars worth of bonds every single month they're holding up the markets a lot of -- scare about you know bond prices coming down and yield spiking up.
I doubt that's gonna happen any time too soon.
But what you need to start thinking about if you are bond holder is this number one maybe start to roll out of some of your bonds.
And into something like an emerging market bond ETF.
Still investing in sovereign debt.
Just not the sovereign debt of the US something like the PC why for example it's.
It's a -- start powershares and make sure got a right powershares ETF it's fantastic.
-- -- basically what it does is it provides you with yields.
You -- yielding right around 4% right now and the beautiful part about that is -- just like a stock.
You have to worry about getting short bonds doing any kind of complex transfers and that's one way to sort of allocate yourself.
Out of US bonds -- how -- is gonna happen soon.
I think -- did -- roll out of US bonds and interest rates rise that's going to be you know a year to tears up now the Fed has said that they said they're gonna keep rates low.
And if they're participating in such a big way but in this amount of bonds per month.
I don't see yields skyrocketing anytime -- you have got up very -- recommendations including.
TLT which is Barclays twenty year treasury bond fund tell us about that.
All right of the TOT here's the deal with that if you wanna hold onto the bond that you have if you're an investor currently owns bonds and you wanna protect yourself against a draw down or against the spike in yields.
You've by the -- -- are -- -- the TOT -- due to hold on your bonds and ensure the TOT your friends are advising you talked about this but it's basic technique that the pros use.
To help hedge against rising interest rates which which would equal falling bond prices and the last when you what talk about that.
-- -- -- Yet you got JPMorgan UST emerging markets bond ETF and market factors.
EM local currency bonds those -- why you like them.
Yet they're both sort of the same thing we talked about and earlier like the -- -- product of both ETFs that invest in foreign.
Sovereign currencies now the last one -- and -- -- That invest in the currency of the market it's providing these -- for instance is set of buying in US dollars.
You -- buying of foreign currencies have the advantage -- -- and that's the MLC.
If you thought the US dollar we're gonna just fallout.
From a bottom look to -- did you know -- the hero were we're not emerging and bond markets like Latin America -- -- to be stronger.
That would be needs yet that you would favor so again all three of those providing you a little bit of a hedge against the dip.
In in US -- It's now I know you want to talk about dark pools and the fact that Finneran is investigating them you say they don't need such heavy scrutiny wife.
Well I.
I think the SEC sticking their nose you know it in the markets business and and and this levels of regulation we've had to endure over the years.
Is the reason because it's a reason for dark pools the reason why -- becomes a popular.
Here's the bottom line.
A dark pool is a place for traders who have a lot of money can go to exchange shares of another -- Jerry if you had a million shares of apple you -- sell and you wanna sell on the open market you might call me if they -- How would you want to buy my one million apple shares for I'd say I don't know.
-- -- sixty dollars and we would make an agreement and we we trade off the market that's a dark pool list.
The SEC is now our -- -- is now looking into dark pools to see if they're influencing the markets or if traders are using.
You know their buying or selling power in the open market to influence dark pools the bottom line is we do not need more regulation.
The more you meddle with markets being free in the more regulations that you put on the markets and more handcuffs you you you -- on.
The water finds another way it's -- the way the markets works a dark pools aren't necessarily a bad thing I think you need the sort of step back and and let them be if you look.
Well I I'm not surprised by that -- -- get a diet but -- about the markets more broadly hear what it what do you make of you know with the Dow is doing what you're seeing among the large cap stocks right now we keep flirting back and forth over the 141000 line.
Please see the -- going.
Well -- -- a couple things first -- -- we got a little bit of technical issue here number one is if you look at volume over the past couple of weeks it's been dissipating in the S&P 500 and the Dow Jones -- the NASDAQ volume has been falling off that's sort of the first sign.
The traders are getting a little bit we -- alright.
Number two you've got how market's extremely overbought so people talk about this and they just sort of you use that word overbought and and you know overly comfortable only talk about the -- being low but statistically speaking.
The chances of a market making the moves and it just did over the past couple of months.
It's something -- less than 2%.
And what that means -- statistician into a mathematical algorithm tech trader is that the markets are due for a pull back Jerry.
I think the S&P.
In my mind needs to come back down around 1420.
I wrote an article will be out tomorrow the details this talked about the technicals I think yes it -- down 1420 but the long term still looks good and -- -- confidence is still there the Russell 2000 is still strong in the Russell 2000 that group of small cap stocks.
If that's making all time highs it tells me as an investor.
People are confident you're gonna -- a small cap jumpy stock if you think things are -- -- -- hand basket.
So that fact makes me think long term things are good but thinks it's his -- due for correction but listen if -- -- investor.
I'm still buying here is maybe buying on the steps -- -- got -- thanks for coming -- appreciate your time thanks Jerry.
