As Recession Fears Rise, Get More Bond Exposure

As inflation continues to punch potential growth in the United States, global investment firm Goldman Sachs predicts a 35% chance of a recession hitting next year.

Consumer prices continue to rise in all areas, which is enough to worry about a possible stagnation in economic growth. Talk of stagflation is already circulating in capital markets.

“Rising commodity prices will likely lead to slower consumer spending as households – and low-income households in particular – are forced to spend a greater share of their income on food and gas,” Goldman notes. know to customers.

However, all is not gloomy. Some economists predict that the United States will remain resilient despite geopolitical challenges that are worsening inflation, especially energy prices.

“The United States is likely to outperform Europe, which is likely to sink into recession, due to the greater internal resilience and agility of the US economy, although the inability of the US Federal Reserve to react timely inflation last year – a historic policy mistake – will undermine policy flexibility,” economist Mohamed El-Erian says in a column.

2 funds to consider

To prepare for the worst, bonds can help provide investors with the safe haven needed to balance their portfolios. A global bond option is the Vanguard Total Bond Market Index Fund ETF Equity (BND).

BND seeks the performance of the Bloomberg US Aggregate Float Adjusted Index, which represents a broad range of public, quality, taxable, fixed income securities in the United States, including government, corporate and international denominated bonds. in dollars, as well as mortgage-backed and asset-backed securities, all with maturities longer than one year.

For more credit risk to get more yield, investors can turn to corporate bonds. One option is the Vanguard Total Corporate Bond ETF Equity ETF (VTC).

VTC seeks to track the performance of a broad, market-weighted corporate bond index. The fund is a fund of funds and uses an index-based investment approach designed to track the performance of the Bloomberg US Corporate Bond Index, which measures the investment-grade, fixed-rate, taxable corporate bond market.

For more news, insights and strategy visit the Fixed income channel.

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