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Investors may want to reduce international exposure right now and stick with the home court. "One of the highest predicting factors for [the] future performance of international stocks versus U.S stocks is what the U.S dollar does," Arthur told CNBC's "ETF Edge" this week. "From 2011 to 2022, the dollar was in a straight bull market, so you were gonna lose in international equities no matter what you did." That's a perfect setup where we're going to be cutting rates before the rest of the world. That's where the catalysts will have to be to see value come back, to see international come back [and] to see emerging come back."
Persons: Kim Arthur, Arthur, CNBC's, Mike Akins, Akins, I'm Organizations: Main Management, U.S, Bank, Microsoft, Apple Locations: U.S
"When you have an up-16% first half of the year, these types of strategies are going to underperform." Arthur explained call writing strategies do typically benefit from a down or flat market but struggle to perform in a rebounding environment. The built-in income-generating options strategies of the JPMorgan Equity Premium Income ETF (JEPI) helped fuel the fund's popularity in 2022. It remains the largest actively managed ETF on the market with nearly $28 billion in assets, but the rebound in growth this year has left the product lagging the broader market. "So, you're not going to keep up with the market with these types of strategies."
Persons: Kim Arthur, Bob Pisani, Arthur, Mike Akins, Pisani, Akins Organizations: Main Management, JPMorgan Locations: CNBC's
Interest rate jitters are meaningfully pushing investors to the shorter end of the yield curve, according to Joanna Gallegos, co-founder of fixed-income ETF issuer BondBloxx. Gallegos, former head of global ETF strategy for JPMorgan, believes it's a sound approach. So, as interest rates are going up, people are a little uncertain about what's going to happen to bond prices really far out," she said. As of Friday's close, the U.S. 10 Year Treasury was yielding around 3.7% — an 84% surge from one year ago. Meanwhile, the U.S. 6 Month Treasury yield was around 5.14%, which reflects a one-year jump of 589%.
Everyone here is amazed at how forgotten segments of the market have rebounded in 2023: international, growth, small cap and bonds. Advisors here are having a hard time wrapping their heads around the idea that there would be a recession ins 2023, and now maybe not. "With real wage growth, large payroll growth and earnings beating expectations it equals a soft landing at worst and maybe no recession near term." Most advisors here are coming to grips with Powell's insistence the Fed will not lower rates this year. Their Equal Weight S & P 500 ETF (RSP) has also attracted significant inflows from investors wary of market cap weighted indexes.
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