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The bond market is showing new signs of unpredictability as expectations over Fed rate cuts shift with every new piece of economic data.

Bond Traders Think Interest Rate Cuts Are Ahead, But One Caveat Keeps Yields Above 4%

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The S&amp;P 500 index, a bellwether for the U.S. stock market, ends February with a 5.3% surge, marking its fourth consecutive month of gains.



Since the tumultuous days of late October, the broader stock market rally now nears an impressive 25% increase.

Investors Poured Nearly $40B Into 10 ETFs In February: Find Out What You&#39;re Overlooking

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As 2023 concludes, the bond market has witnessed a remarkable rally, bolstered by the strength of the U.S. economy and a reduction in inflationary pressures.

Investor Optimism Tested: Navigating 2024 Bond Market&#39;s Uncertain Terrain

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The bond market is showing new signs of unpredictability as expectations over Fed rate cuts <a href="https://www.benzinga.com/opinion/24/03/37938028/exclusive-interest-rates-rode-the-elevator-up-but-analyst-predicts-theyll-take-the-stairs-coming-dow">shift with every new piece of economic data</a>.
Last week, Fed Chair Jerome Powell acknowledged that <a href="https://www.benzinga.com/economics/macro-economic-events/24/03/37857035/fed-chair-powell-opens-door-to-rate-cuts-this-year-downplays-recent-inflation-upt">rate cuts for this year are being decided on a meeting-by-meeting basis</a>. Therefore, it's not possible to predict how much the cost of borrowing will drop in 2024.
However, some investors <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37900527/federal-reserve-pushes-stocks-to-record-highs-as-rate-cuts-loom-nvidia-rallies-appl">continue to price in at least three rate cuts this year</a>. This took the S&amp;P 500 and other market gauges to record heights last week.
Investors priced in significant rate cuts for 2024 during the first two months, as inflation showed consistent signs of easing. 
But rising prices from February's CPI report came in <a href="https://www.benzinga.com/markets/equities/24/03/37615483/inflation-rises-more-than-expected-to-3-2-rebuffs-expectations-of-june-fed-rate-cut">above economist expectations</a>. And stronger than expected economic activity shows that inflation could be harder to tame than many had hoped.
Meanwhile, the fear of <a href="https://www.benzinga.com/markets/equities/24/01/36614222/stagflation-in-2024-red-sea-crisis-could-trigger-domino-effect-for-global-costs">stagflation</a> is weighing on optimism. 
Read Also: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37940764/commodities-poised-for-comeback-in-investor-portfolios-this-time-is-different-strat">Commodities Poised For Comeback In Investor Portfolios: &#8216;The Future Could Be Different,&#8217; Strategist Says</a>
How Treasury Notes Are Reacting: Treasury yields, which come down with interest rate cuts, continue to hang on attractive levels.
The yield on the 10-year U.S. The Treasury note was 4.25% on Tuesday, keeping the cost of borrowing money high for prospective homebuyers looking to get into a mortgage, as well as for corporate borrowers.
The 30-year fixed mortgage rate is still gravitating around 7%, which is <a href="https://www.benzinga.com/markets/equities/24/03/37855254/are-you-a-housing-market-lock-in-high-mortgage-rates-result-in-people-not-living-in-homes-they-w">negatively affecting the U.S. housing market</a>.
Yields on Treasury assets set the floor on mortgages and the general cost of borrowing, as mortgage lenders keep interest rates above bond yields in order to attract similar investors, who would otherwise just decide to invest in Treasury notes.
Yields on the 10-year note peaked at 5% in October of last year. They quickly dropped as it became apparent that the Fed's monetary policy was working. The 10-year Treasury yield went from 3.86% at the start of the year to today's 4.25%.
Investors today are <a href="https://www.wsj.com/finance/investing/treasury-yields-rising-fed-interest-rate-expectations-4a157a85?mod=hp_lead_pos11">more</a> moderate in their rate cut expectations. Current yields continue to reflect expectations that the Fed will cut rates in the future. They are now expecting that prediction to come true on a longer timescale.
Investors continue to expect yields to drop. The only thing that could take yields back to October's heights would be if the market receives very strong signals of economic acceleration, taking inflation back up again.
Retail investors can gain diversified exposure to the bond market by purchasing bond ETFs. The largest ones include Vanguard Total Bond Market Index Fund ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BND#NASDAQ">BND</a>), iShares Core US Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>) and iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>).
Now Read:<a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/03/37891092/5-technologies-that-could-be-worth-220-trillion-by-2030-cathie-woods-ark-predicts-t"> 5 Technologies That Could Be Worth $220 Trillion By 2030, Cathie Wood&#8217;s ARK Predicts &#8211; &#8216;The Time Is Now&#8217;</a>
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The S&amp;P 500 index, a bellwether for the U.S. stock market, ends February with a 5.3% surge, marking its fourth <a href="https://www.benzinga.com/markets">consecutive month of gains.</a>
Since the tumultuous days of late October, the broader stock market rally now nears an impressive 25% increase.
The tech-heavy Nasdaq 100 also paints a picture of extraordinary resilience. It surpassed the 18,000-point mark and closed the month at an all-time high. The surge in the Nasdaq 100, up 28% since late October, offers a testament to the unwavering appetite for tech-oriented investments. 
See Also: <a href="https://www.benzinga.com/markets/equities/24/02/37062104/joe-biden-says-stock-market-strength-is-sign-of-confidence-in-americas-economy-good-news">Joe Biden Says Stock Market Strength Is &#8216;Sign Of Confidence&#8217; In America&#8217;s Economy: &#8216;Good News&#8217;</a>
Within the captivating realm of exchange-traded funds (ETFs), here we highlight those commanding the largest influx of money throughout February.
Among these standouts, six offer exposure to broader equity indices, two pivots towards Treasury bonds, while one extends its focus on Bitcoin (CRYPTO: <a class="ticker" href="https://www.benzinga.com/quote/btc/usd">BTC</a>).
<h3 class="wp-block-heading">Top 10 US ETFs By Inflows In February</h3>
<figure class="wp-block-table is-style-stripes"> 
<table>
<thead>
<tr>
<th>ETF</th>
<th>Fund Flows (1M)</th>
<th>AUM</th>
</tr>
</thead>
<tbody>
<tr>
<td>Vanguard S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VOO#NYSE">VOO</a>)</td>
<td>6.815B</td>
<td>413.71B</td>
</tr>
<tr>
<td>iShares Core S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IVV#NYSE">IVV</a>)</td>
<td>5.881B</td>
<td>442.69B</td>
</tr>
<tr>
<td>Vanguard Information Technology ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VGT#NYSE">VGT</a>)</td>
<td>5.786B</td>
<td>69.413B</td>
</tr>
<tr>
<td>iShares Bitcoin Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IBIT#NYSE">IBIT</a>)</td>
<td>3.891B</td>
<td>8.07B</td>
</tr>
<tr>
<td>Vanguard Intermediate-Term Treasury ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VGIT#NYSE">VGIT</a>)</td>
<td>3.1B</td>
<td>24.816B</td>
</tr>
<tr>
<td>SPDR Portfolio S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPLG#NYSE">SPLG</a>)</td>
<td>3.066B</td>
<td>31.938B</td>
</tr>
<tr>
<td>Vanguard Total Stock Market ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VTI#NYSE">VTI</a>)</td>
<td>2.819B</td>
<td>374.803B</td>
</tr>
<tr>
<td>iShares Core U.S. Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>)</td>
<td>2.348B</td>
<td>101.583B</td>
</tr>
<tr>
<td>Invesco QQQ Trust, Series 1 (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/QQQ#NASDAQ">QQQ</a>)</td>
<td>1.874B</td>
<td>252.624B</td>
</tr>
<tr>
<td>iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>)</td>
<td>1.566B</td>
<td>48.99B</td>
</tr>
</tbody>
</table>
<figcaption class="wp-element-caption">Source: TradingView</figcaption></figure>
On Friday, Feb. 9, the S&amp;P 500 index <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/02/37041128/s-p-500-claims-5-000-as-tech-soars-bitcoin-rockets-above-47-000-whats-driving-marke" target="_blank" rel="noreferrer noopener">topped 5,000 for the first time</a>.
This milestone prompted remarks from President Joe Biden. &#8220;The stock market going strong is a sign of confidence in America's economy,&#8221; he said on social media.
Now Read: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/24/02/37402333/exclusive-magnificent-7-takes-center-stage-in-roundhills-expanded-etf-lineup-with-i">EXCLUSIVE: Magnificent 7 Takes Center Stage In Roundhill&#8217;s Expanded ETF Lineup With Inverse And Leveraged Options</a>
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Investors Poured Nearly $40B Into 10 ETFs In February: Find Out What You're Overlooking

The traditional 60/40 investment portfolio has recorded a remarkable year of growth in 2023, sharply rebounding from a disappointing year in 2022. As of Dec. 27, the year-to-date performance of the 60/40 portfolio, benchmarked by the iShares Core Growth Allocation ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AOR#NYSE">AOR</a>), <a href="https://www.benzinga.com/money/what-is-the-60-40-investment-strategy">stands at approximately 13%. </a>
This performance figure ranks as the third-best year for the strategy since its inception in 2008, trailing only behind the strong years of 2009 and 2019.
As we enter the new year, investors are pondering whether the favorable conditions that supported both equities and bonds in the second half of the year will endure.
<h2 class="wp-block-heading">60/40 Portfolio In 2022-2023: From Downturn to Upswing</h2>
The 60/40 portfolio is a time-tested investment strategy known for its simplicity and effectiveness. It involves allocating 60% of the portfolio to stocks and 40% to bonds, with the aim to strike a balance between risk and reward.
Stocks offer the potential for higher returns but come with higher risk, while bonds generally provide lower but more stable returns. By combining both asset classes, the portfolio naturally diversifies, potentially reducing the risk of significant losses since stocks and bonds often react differently to market conditions.
In 2022, the traditional 60/40 portfolio faced one of its most challenging years due to the Fed&#8217;s aggressive interest rate hikes, which created strong headwinds for both equities and fixed-income assets.
The gauge fell as much as 17%, wiping out a sizable portion of the pandemic rally. 
An initial $1,000 investment in a 60/40 portfolio at the beginning of 2022 dipped to less than $800 by November of that year, only to rebound to its current value of $928.
<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="650" height="650" src="https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/27172235/newplot-5-1.jpeg" alt="" class="wp-image-170022" srcset="https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/27172235/newplot-5-1.jpeg 650w,https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/27172235/newplot-5-1-300x300.jpeg 300w,https://editorial-assets.benzinga.com/wp-content/uploads/2023/12/27172235/newplot-5-1-150x150.jpeg 150w" sizes="(max-width: 650px) 100vw, 650px" /></figure>
However, as inflation subsided in 2023, traders began to anticipate a normalization of elevated interest rates, betting on the Federal Reserve reducing borrowing costs in 2024. 
Money markets currently factor in six rate cuts by 25 basis points next year, a figure substantially higher than the indications given by Federal Reserve officials at the latest meeting, with the dot-plot showing a median preference for 75-basis-point cuts. 
Read also: <a href="https://www.benzinga.com/23/08/33967223/why-the-6040-portfolio-rule-is-not-for-everyone-the-statistics-might-surprise-you">Why The 60/40 Portfolio Rule Is NOT For Everyone – The Statistics Might Surprise You</a>
<h2 class="wp-block-heading">Will the 60/40 Portfolio Continue to Rally in 2024?</h2>
Looking ahead to 2024, it remains to be seen whether the numerous rate cuts currently priced in by the market will be delivered by the Federal Reserve. 
If these rate cuts materialize, bond yields are likely to continue heading lower, benefiting fixed-income assets and potentially rate-sensitive stocks such as those in the technology, real estate, and financial sectors.
On the other hand, if the decline in inflation stalls or fresh pressures emerge, the Federal Reserve may find it inappropriate to deliver as many rate cuts as currently expected by market participants. 
This could lead to disappointment in the markets and potentially weigh on both equities and bonds.
In summary, the 60/40 portfolio has made a strong comeback in 2023, but its performance in 2024 will depend on whether the anticipated rate cuts materialize and how economic factors evolve.
<h2 class="wp-block-heading">5 Strategies to Create a 60/40 Portfolio</h2>
Aside from the iShares Core Growth Allocation ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AOR#NYSE">AOR</a>), there are several other ways for investors to construct a 60/40 portfolio. 
Here are seven different approaches an investor can use to replicate a 60/40 portfolio, with each pairing a stock ETF with a bond ETF:
<ol>
<li>S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>) and iShares 20+ Year Treasury Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NYSE">TLT</a>): Combining SPY, which tracks the S&amp;P 500 Index, with TLT, focusing on long-term U.S. Treasury bonds, offers a balanced portfolio with exposure to the U.S. stock market and the stability of government bonds.</li>
<li>Vanguard Total World Stock ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VT#NYSE">VT</a>) and iShares Core U.S. Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>): VT provides global stock market exposure, while AGG tracks the U.S. Aggregate Bond Index, diversifying bond exposure.</li>
<li>iShares MSCI ACWI ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/ACWI#NYSE">ACWI</a>) and Vanguard Total International Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BNDX#NYSE">BNDX</a>): ACWI offers global equity exposure, and BNDX focuses on non-U.S. bonds, providing international diversification.</li>
<li>iShares Core S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IVV#NYSE">IVV</a>) and Vanguard Total Bond Market ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BND#NYSE">BND</a>): Similar to SPY, IVV tracks the S&amp;P 500, and BND provides diversified exposure to the U.S. bond market.</li>
<li>Vanguard Total Stock Market ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/VTI#NYSE">VTI</a>) and Vanguard Total World Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/BNDW#NYSE">BNDW</a>): VTI offers exposure to the entire U.S. stock market, and BNDW provides a globally diversified bond exposure.</li>
</ol>
Read now: <a href="https://www.benzinga.com/economics/macro-economic-events/23/12/36403950/treasury-etf-and-real-estate-sector-rise-together-as-30-year-yields-dip-below-4">Treasury ETF And Real Estate Sector Rise Together As 30-Year Yields Dip Below 4%</a>
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Treasuries

ACWI

BNDW

BNDX

60/40 Portfolio Bounces Back From 2022 Slump: Is It The Right Investment Strategy For 2024?

In recent weeks, several bond exchange-traded funds (ETFs) have experienced a significant surge in inflows, indicating a <a href="https://www.benzinga.com/money/best-bond-etf">heightened interest among investors. </a>
This shift coincided with a market that significantly upped bets on Federal Reserve rate cuts for 2024, backed by a robust and ongoing <a href="https://www.benzinga.com/topic/inflation">disinflationary trend</a> in the U.S. economy. 
Speculators have gone as far as factoring in an initial rate cut as early as March 2024, with whispers of a total of five rate cuts by December 2024.
But which bond ETFs are currently piquing investors&#8217; interest?
<h2 class="wp-block-heading">From &#8216;Cash-Like&#8217; to &#8216;Equity-Like&#8217;</h2>
While the third quarter in 2023 witnessed a notable uptick in inflows into cash-linked bond ETFs, primarily those investing in short-dated Treasury bonds and bills, the latest trends are veering towards more aggressive fixed-income strategies.
Investors are strategically positioning themselves in anticipation of an imminent U-turn in Fed&#8217;s monetary policy stance, eyeing a select group of bond ETFs that have weathered the storm during the recent spate of interest rate hikes.
Their bullish stance on riskier bond ETFs underscores a burgeoning belief that the bond market landscape could undergo a substantial recalibration in the coming months, as they brace for a more accommodating monetary policy environment.
These ETFs encompass a diverse range, including long-term Treasury bonds, emerging-market bonds, and high-yield corporate bonds. 
<h2 class="wp-block-heading">Top 10 Bond ETFs by Fund Inflows in the Past Month</h2>
<figure class="wp-block-table"> 
<table>
<thead>
<tr>
<th>Name</th>
<th>Fund Flows (1-month)</th>
</tr>
</thead>
<tbody>
<tr>
<td>iShares Trust &#8211; iShares iBoxx $ High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/HYG#NYSE">HYG</a>)</td>
<td>$3.69 bn</td>
</tr>
<tr>
<td>iShares Trust &#8211; iShares Core U.S. Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>)</td>
<td>$2.62 bn</td>
</tr>
<tr>
<td>SPDR Series Trust &#8211; SPDR Bloomberg High Yield Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/JNK#NYSE">JNK</a>)</td>
<td>$1.99 bn</td>
</tr>
<tr>
<td>iShares Trust &#8211; iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/EMB#NASDAQ">EMB</a>)</td>
<td>$1.89 bn</td>
</tr>
<tr>
<td>iShares Trust &#8211; iShares 20+ Year Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>)</td>
<td>$1.62 bn</td>
</tr>
<tr>
<td>Vanguard Bond Index Funds &#8211; Vanguard Total Bond Market ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BND#NASDAQ">BND</a>)</td>
<td>$1.56 bn</td>
</tr>
<tr>
<td>iShares Trust &#8211; iShares Broad USD High Yield Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/USHY#NYSE">USHY</a>)</td>
<td>$1.31 bn</td>
</tr>
<tr>
<td>Vanguard Scottsdale Funds &#8211; Vanguard Long-Term Treasury ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VGLT#NASDAQ">VGLT</a>)</td>
<td>$665.99 bn</td>
</tr>
<tr>
<td>Vanguard Charlotte Funds &#8211; Vanguard Total International Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BNDX#NASDAQ">BNDX</a>)</td>
<td>$641.06 bn</td>
</tr>
<tr>
<td>iShares Trust &#8211; iShares 5-10 Year Investment Grade Corporate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IGIB#NYSE">IGIB</a>)</td>
<td>$216.67 bn</td>
</tr>
</tbody>
</table>
</figure>
Read Now: <a href="https://www.benzinga.com/etfs/specialty-etfs/23/12/36075348/golds-record-high-why-havent-gold-miners-followed-suit">Gold&#8217;s Record High: Why Haven&#8217;t Gold Miners Followed Suit?</a>
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Emerging Markets

New ETFs

Emerging Market ETFs

Federal Reserve

iShares JPMorgan USD Emerging Markets Bond Fund

IGIB

USHY

VGLT

Investors Pour Billions To Aggressive Bond ETFs, Banking On Multiple Fed Rate Cuts in 2024

The U.S. dollar made something of a comeback in the last two days of November, following a month of losses as markets leveraged rising expectations the Federal Reserve will start cutting rates in the first <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/36028726/we-are-now-at-the-soft-landing-economists-markets-react-to-subdued-pce-inflation-da">quarter of 2024.</a>
Although the dollar index (DXY) was fractionally lower on Friday, during the final two days of November the DXY gained a cumulative 0.6%.
But analysts believed the rally would be short-lived while equities continued to surge and rate cut optimism remained high. Bank of America FX strategist Athanasios Vamvakidis said: &#8220;We are bearish on the dollar into 2024 — we could see a correction from oversold positions into the year end, but would sell the bounce for a 2024 decline.&#8221;
Also Read: <a href="https://www.benzinga.com/markets/equities/23/11/35985582/dollar-decline-stock-market-rally-explains-70-of-recent-us-dollar-downtrend-says-bofa">Dollar Decline: Stock Market Rally Explains 70% Of Recent US Dollar Downtrend</a>
<h2 class="wp-block-heading">Dollar Decoupling</h2>
In November, as investors&#8217; appetite for risk led to major gains in the equity markets, the dollar largely diverged from its usual drivers tied to the economy, geopolitics, and policy. Instead, it became the anti-equity trade.
As the S&amp;P 500 stock index climbed 8.9% during November, the dollar index (DXY) fell 3.1%. During the same period, the SPDR S&amp;P 500 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), an exchange-traded fund that tracks the S&amp;P 500, gained 9.1%.
Among the major currency crosses, the dollar&#8217;s worst performance during November was against the New Zealand dollar (NZD/USD) — down 4.6%. The dollar lost 3.6% versus the British pound (GBP/USD) and was down 2.6% against the euro (EUR/USD).
The performance of exchange traded funds tracking investment behavior in the dollar also illustrated market sentiment towards the U.S. currency. The Invesco DB USD Index Bullish Fund ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UUP#NYSE">UUP</a>) fell 2.5% during November, while the Invesco DB US Dollar Index Bearish Fund (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/UDN#NYSE">UDN</a>) rose 3.3%.
<h2 class="wp-block-heading">Treasury Market Rally — Yields Retreat From 5%</h2>
The biggest market driver during the month was rising expectations that the Federal Reserve had ended its cycle of interest rate hikes, after the central bank left its main Fed Funds Rate at 5.25%-5.5% at its September and November policy meetings.
Expectations of a more dovish Fed at the Dec. 13 meeting were further driven by data that showed <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/36028726/we-are-now-at-the-soft-landing-economists-markets-react-to-subdued-pce-inflation-da">inflation becoming more benign</a>. Consumer price data in early November showed the annual headline inflation rate dropping to 3.2%, while the rate as measured by personal consumption expenditures — the Fed&#8217;s favored measure — fell to 3%. The Fed&#8217;s target rate is 2%.
Hopes of a more dovish Fed also spurred a rally in the U.S. government bonds market. Prices climbed, driving yields lower from 16-year highs. Having peaked at 5.02% in October, the 10-year Treasury yield was down to 4.32% on Friday.
The iShares Core U.S. Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>), an exchange traded fund that tracks the broad U.S. bond market, gained 4.3% during November.
Now Read: <a href="https://www.benzinga.com/news/23/11/36004201/november-rally-sets-treasury-bonds-on-track-for-best-month-in-40-years">November Rally Sets Treasury Bonds On Track For Best Month In 40 Years</a>
Photo: Shutterstock

Currency ETFs

Forex

PowerShares DB US Dollar Index Bearish Fund

PowerShares DB US Dollar Index Bullish Fund

Dollar Dumps In November As Fed Rate Cut Optimism Increases

U.S. government bonds are on track for their best month in nearly 40 years following a summer and early autumn sell off that saw foreign buyers all but <a href="https://www.benzinga.com/news/23/11/35856564/foreign-buyers-desert-us-treasury-bond-market-as-supply-increases">desert the Treasury markets</a>.
The dramatic turnaround in November came as Treasury yields dropped from 16-year highs — with the benchmark 10-year yield <a href="https://www.benzinga.com/federal-reserve/23/10/35401487/10-year-treasuries-exceed-5-for-first-time-since-2007-then-crater-on-ackman-short-cover">hitting 5%</a> in late October — thanks to growing optimism that the Federal Reserve&#8217;s next policy move will be a rate cut, possibly in the first quarter of 2024.
The Bloomberg U.S. Aggregate Bond index (Agg), which tracks total returns on US bonds, is up 4.3% in November, setting it up for its best monthly percentage gain since 1985.
Similarly, the iShares Core U.S. Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>), an exchange traded fund that tracks the Bloomberg benchmark, is up 4.1% so far this month — its best monthly performance since December 2008.
Also Read: <a href="https://www.benzinga.com/federal-reserve/23/10/35401487/10-year-treasuries-exceed-5-for-first-time-since-2007-then-crater-on-ackman-short-cover">10-Year Treasuries Exceed 5% For First Time Since 2007</a>
<h2 class="wp-block-heading">Spring/Autumn Treasury Sell-Off</h2>
Earlier this month data from the Treasury department showed that foreign buyers, including the central banks of Japan and China, were <a href="https://www.benzinga.com/news/23/11/35856564/foreign-buyers-desert-us-treasury-bond-market-as-supply-increases">net sellers of U.S. bonds</a> in September to the tune of $1.7 billion.
The Bloomberg Agg index suggests investors were net sellers between May and October. Indeed, Oct. 23 saw the yield on the 10-year Treasury peak at a 16-year high of 5.021% — when yields move higher Treasury prices move lower as investors sell.
So, what&#8217;s bought buyers back into the market? Even on the day the 10-year yield hit its peak, it ended lower on the day at 4.85%. Some of the bond buying came from hedge fund short sellers, <a href="https://www.benzinga.com/federal-reserve/23/10/35401487/10-year-treasuries-exceed-5-for-first-time-since-2007-then-crater-on-ackman-short-cover">including Bill Ackman&#8217;s Pershing Square Capital Management</a>, who were covering their positions.
Then the Federal Reserve, at its Nov. 1 policy meeting, held interest rates steady for the second consecutive meeting, spurring hopes among Treasury and equity investors that its rate-hike cycle was over.
<h2 class="wp-block-heading">Inflation Rate Drops</h2>
Hopes of a more dovish policy stance from future Fed meetings were raised by U.S. inflation data that showed headline consumer prices had dropped to 3.2% in October — creeping down towards the Fed&#8217;s 2% target rate.
&#8220;It is clear from the sharpness of the move across asset markets in the past week or two, that the CPI inflation release was a pivotal moment in the market's interpretation of the outlook for Fed interest rate policy,&#8221; said Jane Foley, senior FX strategist at Rabobank.
The benchmark 10-year yield stood at 4.29% on Wednesday morning, still higher than the 3.7% at which it started the year, but at a level that is now attracting buyers again.
Now Read: <a href="https://www.benzinga.com/news/23/11/35856564/foreign-buyers-desert-us-treasury-bond-market-as-supply-increases">Foreign Buyers Desert US Treasury Bond Market As Supply Increases</a>
Photo: Shutterstock

Short Sellers

November Rally Sets Treasury Bonds On Track For Best Month In 40 Years

Investors have accumulated record amounts of cash and equivalent assets as a way to hedge against the <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/10/35150923/why-this-cboe-global-markets-analyst-is-bullish-at-time-of-geopolitical-turmoil">volatility of recent times.</a>
Now, fund managers are urging investors to put that money to work, as decreasing inflation and the potential for an economic slowdown may lead to profitable opportunities in the bond markets.
<a href="https://www.ici.org/research/stats/mmf">According</a> to ICI Global, capital invested into money market fund assets reached a record of $5.73 trillion last week. Money market funds are characterized by having very low volatility and very high liquidity, holding large amounts of cash and other low-risk securities in their portfolios.
Investors tend to lean towards money market investing in times of uncertainty, when availability of cash is a prime concern and tolerance to risk is low. Money market funds give better returns than cash deposits on banks, which is why investors have been flocking towards these assets since the Fed began its tightening cycle last year, which has now taken the federal funds rate to between 5.25% and 5.50%.
But, with <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/35783516/october-inflation-drop-triggers-markets-rally-economists-reassess-after-surprising-">inflation dropping to more comfortable levels</a>, bond managers are suggesting that now is an optimal time to allocate some of those assets into the bond market.
Minutes from the Federal Open Market Committee&#8217;s November meeting revealed that Fed participants view the current interest rate level of between 5.25% and 5.5% as restrictive, potentially signaling the end of their intensive rate hike campaign in light of recent positive inflation data and acknowledging the significant tightening of financial <a href="https://www.benzinga.com/economics/macro-economic-events/23/11/35903926/november-fomc-minutes-fed-leans-toward-rate-stability-as-inflation-eases">conditions in recent months.</a>
Also Read: <a href="https://www.benzinga.com/news/23/11/35905071/musk-and-the-magnificent-9-how-worlds-10-richest-people-bagged-400b-in-2023">Musk And The Magnificent 9: How World&#8217;s 10 Richest People Bagged $400B In 2023</a>
Greg Whiteley, head of Government Securities Investing at DoubleLine <a href="https://www.bloomberg.com/news/articles/2023-11-21/bond-managers-of-2-5-trillion-make-case-for-leaving-cash-behind?srnd=premium&amp;sref=TBDibEcD">told</a> Bloomberg that the range of 4.5% to 5% yield "is a safe place to be buying bonds."
The two-year treasury bond currently yields at 4.89% while the 5- and 10-year bonds have a yield of 4.44%.
Whiteley and other fund managers contend that the Federal Reserve&#8217;s actions are effectively slowing down the economy, a necessary step to reduce inflation back to the 2% target. Economist Gary Shilling <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/35867664/legendary-economist-foresees-30-drop-in-stocks-predicts-recession-and-feds-credibil">this week predicted that a recession is imminent</a>, potentially including a 30% drop in stock values, which further supports the strategy of redirecting investments towards safer and comparatively higher-yielding assets such as bonds.
Piper Sandler strategist Michael Kantrowitz echoed the same prediction over the weekend, based on several data points coming<a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/35866823/top-wall-street-strategist-expresses-worries-about-looming-recession-we-are-at-the-"> from housing, profits, and employment.</a> 
The housing market showed a slight uptick last week but<a href="https://www.benzinga.com/news/23/11/35836886/housing-market-shows-a-slight-uptick-but-remains-slow-ahead-of-beazer-homes-earnings-call"> continues at historically low levels</a>, with mortgage rates sustaining prices that are unaffordable for the majority of homebuyers.
Other economists, however, lean towards a soft-landing scenario, which would mean a return to pre-pandemic<a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/11/35820947/us-economy-gearing-towards-soft-landing-amid-inflation-concerns-says-economists"> inflation levels without a recession</a>.
Bond fund managers argue that sticking to cash "means you miss all the potential price appreciation if the economy starts to slow," as Ryan Murphy of Capital Group told Bloomberg.
The managers also pointed to <a href="https://www.benzinga.com/money/what-are-mortgage-backed-securities">mortgage bonds</a> as a sector that could lift off next year if interest rates come down. Mortgage-backed securities consist of pools of mortgages that lenders bundle together and sell as securities to third parties in order to free up more cash to continue lending.
While these securities gained a bad reputation for their role in the 2008 financial crash, increased regulation has made them appealing again. Although they still carry more risk than cash or government bonds, they're generally considered less risky than corporate bonds, because there&#8217;s real estate as collateral, and they carry less volatility than stocks.
These include Vanguard Total Bond Market ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/BND#NASDAQ">BND</a>) and iShares Core US Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>) for the broad ranging bond market, and iShares MBS ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/MBB#NASDAQ">MBB</a>) as well as Vanguard Mortgage-Backed Securities ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/VMBS#NASDAQ">VMBS</a>) for specific exposure to mortgage-backed securities.
Now Read: <a href="https://www.benzinga.com/fintech/23/11/35904576/sam-altman-in-discussions-about-openai-return-as-employees-revolt-and-msft-picks-up-the-pieces">Sam Altman In Discussions About OpenAI Return As Employees Revolt, Microsoft Picks Up The Pieces</a>
Image by Shutterstock.

Real Estate

VMBS

Ready For Recession? Fund Managers Advocate Shift To Treasury, Mortgage Bonds

As the market eagerly awaits the next CPI report, the overarching question remains: Is the U.S. economy on track to hit the Fed&#8217;s 2% inflation target, or are we grappling with <a href="https://www.benzinga.com/economics/macro-economic-events/23/09/34370284/august-cpi-preview-investors-brace-for-inflation-uptick-headache-looms-for-powell">more tenacious inflationary trends?</a>
The July Curveball and What&#8217;s In Store For August: Despite a year-long trend of dropping annual inflation rates, July threw us a curve with a jump from 3% to 3.2% — slightly under the anticipated 3.3%.
Expectations point to headline inflation increasing to 3.6% YoY. On a monthly basis, the CPI is projected to advance by 0.6%, marking an acceleration from the 0.2% uptick in July. The factor to blame? Just look at oil prices. 
But here&#8217;s the twist &#8211; core inflation, often a truer tell of the underlying inflationary pressures, might dial down from 4.7% to 4.3%.
Read also: <a href="https://www.benzinga.com/etfs/specialty-etfs/23/09/34335973/the-biggest-short-trader-bets-30k-on-1-100-vix-spike-by-february-2024">The Biggest Short: Trader Bets $30K On 1,100% VIX Spike By February 2024</a>
Market Speculations: Mixed inflation signals have investors buzzing about possible market movements post the August CPI release, which is set to occur on Sept. 13 at 8:30 a.m. ET.
Here&#8217;s a recap of how five major ETFs moved following prior CPI announcements.
1. SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>)
<ul>
<li>Aug. 10, 2023: On the day July&#8217;s CPI data came out, SPY barely blinked, staying flat. However, the following week was less serene, with the ETF sliding down by 2%.</li>
<li>July 12, 2023: June&#8217;s CPI report seemed to spark some optimism. The SPY appreciated 0.8% on the back of the lower-than-anticipated figures, then maintained its momentum, climbing another 2% over the ensuing week.</li>
<li>June 13, 2023: Once again, a softer inflation report led to a boost in investor confidence. SPY went up by 0.7% on the release day, and broadly maintained that level in the subsequent week.</li>
</ul>
2. iShares Core U.S. Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>)
<ul>
<li>Aug. 10, 2023: AGG fell 0.7% on the day and slid another 1% the following week after July&#8217;s CPI release.</li>
<li>July 12, 2023: Following June&#8217;s CPI, AGG gained 0.8% immediately and added another 0.8% over the week.</li>
<li>June 13, 2023: Post-May&#8217;s CPI data, AGG dipped 0.5% but rebounded with a 0.8% rise in the subsequent week.</li>
</ul>
3. SPDR Gold Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/GLD#NYSE">GLD</a>)
<ul>
<li>Aug. 10, 2023: GLD dipped 0.1% on release day and went down another 1.3% over the week post-July&#8217;s CPI.</li>
<li>July 12, 2023: After June&#8217;s CPI, GLD surged 1.4% on the day and then added 0.5% in the week.</li>
<li>June 13, 2023: Post-May CPI, GLD dropped 0.7% and declined another 0.4% during the week.</li>
</ul>
4. iShares Russell 2000 ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/IWM#NYSE">IWM</a>)
<ul>
<li>Aug. 10, 2023: Small-cap stocks tracked by the IWM ETF fell 0.4% on release day and went down another 3.7% over the week post-July&#8217;s CPI.</li>
<li>July 12, 2023: After June&#8217;s CPI, IWM rose 1.1% on the day and then added 2.6% in the week.</li>
<li>June 13, 2023: Post-May CPI, IWM saw a solid 1.1% rise and then declined 1.4% through the week.</li>
</ul>
5. iShares 20+ Treasury Bond ETF (NASDAQ:<a class="ticker" href="https://www.benzinga.com/stock/TLT#NASDAQ">TLT</a>)
<ul>
<li>Aug. 10, 2023: TLT took a hit of 1.7% on the day following July&#8217;s CPI and deepened its decline by 2.3% over the subsequent week.</li>
<li>July 12, 2023: In response to June&#8217;s CPI, TLT surged 1.1% and continued its ascent, marking a 2% rise throughout the week.</li>
<li>June 13, 2023: Post-May&#8217;s CPI figures, TLT saw a 1% drop but rebounded with a notable 2.1% gain in the week that followed.</li>
</ul>
Read now: <a href="https://www.benzinga.com/markets/equities/23/09/34372193/oil-climbs-iphone-faces-china-ban-uaw-strike-looms-the-week-in-the-markets">Oil Climbs, iPhone Faces China Ban, UAW Strike Looms: The Week In The Markets</a>
Photo: Shutterstock

CPI Report Countdown: 5 ETFs Bracing For August's Inflation Numbers

The bond market in 2023 has not experienced the rally that many expected at the beginning of the year, following nightmarish performance in 2022 and rising expectations of a <a href="https://www.benzinga.com/economics/macro-economic-events/23/07/33099550/attention-shifts-to-fed-minutes-volatility-may-resume-this-week-as-markets-do-not" target="_blank" rel="noreferrer noopener">Fed policy turn.</a> 
Yet investor inflows into bond-related ETFs are running hot these days, fueled by bets that the fixed-income market will soon reverse this trend. 
The iShares Core U.S. Aggregate Bond ETF (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/AGG#NYSE">AGG</a>), the second-largest bond ETF in the world with $92 billion in assets under management, has seen significant inflows of $5.4 billion in the second quarter of 2023, matching its best quarter ever in the second quarter of 2020, according to Koyfin data. 
Despite the strong inflow momentum, the performance of the U.S. corporate investment-grade market has been negative in 2023, down 0.4% year-to-date. The investment grade bond market still remains 15% lower than its level at the beginning of 2022 and 18.6% below its record highs of 2020.
<h2 class="wp-block-heading">No US Recession, Hawkish Fed Prevent Bond Rally in 2023</h2>
The bond market&#8217;s failure to rally in 2023 can be attributed to a stronger-than-expected U.S. economy and job market, both of which have materially reduced risks of a recession. This has led the Federal Reserve to keep focusing on combating inflation through further interest rate hikes, which hurt fixed-income assets. 
Bond bulls who expected a Fed reversal and priced in rate cuts this year have seen their optimistic expectations significantly reduced by the resiliency of the U.S. economy.
Compared to the lows of October 2022, the U.S. bond market ETF has only gained 4.5%, while the S&amp;P 500 Index, tracked by the SPDR S&amp;P 500 ETF Trust (NYSE:<a class="ticker" href="https://www.benzinga.com/stock/SPY#NYSE">SPY</a>), has gained 27.6%. This stark performance difference highlights the clear overperformance of stocks compared to bonds in the first half of 2023.
<a href="https://www.benzinga.com/money/best-bond-funds" target="_blank" rel="noreferrer noopener">Read more: Best Bond Funds in July 2023</a>
<h2 class="wp-block-heading">Chart: US IG Bonds Have Barely Recovered From 2022 Rout</h2>
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="850" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101702/AGG_2023-07-05_16-16-49_33942-1024x850.png" alt="" class="wp-image-62594" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101702/AGG_2023-07-05_16-16-49_33942-1024x850.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101702/AGG_2023-07-05_16-16-49_33942-300x249.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101702/AGG_2023-07-05_16-16-49_33942-768x637.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101702/AGG_2023-07-05_16-16-49_33942.png 1482w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
<h2 class="wp-block-heading">As Yields Rise, Bond Bulls Become Even More Bullish</h2>
Despite the lackluster performance of the bond market in 2023, some of the largest bond managers, such as Brandywine Global Investment Management, Columbia Threadneedle Investments and Vanguard Group Inc., maintain a bullish view on the U.S. debt market.
These managers are confident that a strong fixed-income rally is on the horizon. They are hesitant to give up now&nbsp;that&nbsp;ultra-safe Treasury bills yielding around 5% represent an appealing opportunity today.
Roger Hallam, global head of rates at Vanguard Asset Management, recently said &#8220;the bonds-are-back narrative still holds,&#8221; adding that fixed-income assets offer &#8220;attractive coupons and ballast to a portfolio, and as you saw in March, if things go badly, bonds can rally a lot."
&#8220;For 2024, I put my chips on the market that the lagged effects of tightening means the Fed will cut," said Gene Tannuzzo, global head of fixed income at Columbia Threadneedle Investments. 
Yields on U.S. investment-grade corporate bonds are averaging around 5.6%, a significant increase from 2.3% at the start of 2022 and the low of 1.8% in 2021.
<h2 class="wp-block-heading">Chart: IG Bond Yields Surge To 5.6%, While 2-Year Treasury Yields Near 5%</h2>
<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="766" src="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101314/BAMLC0A0CMEY_2023-07-05_16-12-59_0ec21-1024x766.png" alt="" class="wp-image-62592" srcset="https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101314/BAMLC0A0CMEY_2023-07-05_16-12-59_0ec21-1024x766.png 1024w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101314/BAMLC0A0CMEY_2023-07-05_16-12-59_0ec21-300x224.png 300w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101314/BAMLC0A0CMEY_2023-07-05_16-12-59_0ec21-768x575.png 768w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101314/BAMLC0A0CMEY_2023-07-05_16-12-59_0ec21-1536x1149.png 1536w,https://s3.amazonaws.com/editorial.benzinga.com/wp-content/uploads/2023/07/05101314/BAMLC0A0CMEY_2023-07-05_16-12-59_0ec21.png 1644w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>
Photo via Pixabay.

Analyst Color

Analyst Ratings

Trading Ideas

Is the Bond Market Poised For Takeoff In The Second Half? US Aggregate Bond ETF Sees Record Inflows

The SPDR S&amp;P 500 ETF Trust (ARCA: SPY) experienced an outstanding $18.1 billion in net inflows in May, the greatest flow performance since December 2021, when the fund received $25.6 billion, according to Koyfin data.
The ETF is the world&#39;s biggest with approximately $400 billion in assets under management.
The influx into the largest ETF tracking the S&amp;P 500 index corresponded with a remarkable rise in AI-related stocks and the rising dominance of tech giants among the <a href="https://www.benzinga.com/quote/SPY/news" target="_blank">500 most capitalized U.S. firms</a>.&nbsp;
Tech Supremacy: The technology and communication services sectors account for around 37% of the total S&amp;P 500 index. Within this niche, the combined weight&nbsp;of five tech titans&nbsp;accounts&nbsp;for around 25% of the index:&nbsp;Apple&nbsp;Inc&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/aapl#NASDAQ">AAPL</a>) at 7.9%, Microsoft Corp. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/msft#NASDAQ">MSFT</a>) at 7%, Alphabet Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/goog#NASDAQ">GOOG</a>) (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/googl#NASDAQ">GOOGL</a>) at 3.9%, Amazon.com,&nbsp;Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/amzn#NASDAQ">AMZN</a>) at 3.1%, and NVIDIA Corporation&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/nvda#NASDAQ">NVDA</a>) at 2.7%. An equally weighted portfolio made up of these five S&amp;P 500&nbsp;heavyweights would have gained 62% so far in 2023, compared to the 9.7% performance of the market.&nbsp;
As these stocks gathered speed and rose in relative weight, investors seized the opportunity to <a href="https://www.benzinga.com/topic/artificial-intelligence" target="_blank">profit from a potential AI boom.</a>
Other ETFs Flows To Know: The Invesco QQQ Trust Series 1&nbsp;(NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/qqq#NASDAQ">QQQ</a>), the biggest ETF tracking the Nasdaq 100 index, witnessed $1.8 billion in net inflows last month, the best monthly performance so far in 2023.&nbsp;
<ul>
<li>The SPDR Dow Jones Industrial Average ETF Trust (ARCA: DIA) recorded $232 million in net inflows last month, following five consecutive months of outflows.&nbsp;</li>
<li>The SPDR Gold Trust&nbsp;(ARCA: GLD), printed $873 million in net inflows in May, the highest since March 2022.&nbsp;</li>
<li>Value-oriented ETFs had withdrawals, while growth-oriented ETFs saw inflows. The&nbsp;<a href="https://www.benzinga.com/money/vanguard-review/">Vanguard</a> Value Index Fund ETF (ARCA: VTV) witnessed $3.75 billion in outflows. The Vanguard Growth Fund ETF (ARCA: VUG) posted $1.5 billion in inflows.</li>
<li>Investors withdrew money from&nbsp;the Energy Select Sector SPDR Fund (ARCA: XLE) and&nbsp;the Financial Select Sector SPDR Fund (ARCA: XLF), which saw outflows of $1.6 billion and $2.4 billion, respectively.&nbsp;</li>
<li>Inflows were recorded&nbsp;by the Communication Services Select Sector SPDR Fund (ARCA: XLC) at $636 million&nbsp;and the&nbsp;Technology Select Sector SPDR Fund (ARCA: XLK) at $23.5 million.</li>
<li>Finally, iShares Core U.S. Aggregate Bond ETF (ARCA: AGG), the largest ETF tracking&nbsp;investment-grade U.S. bonds, had $3.2 billion in net inflows, the highest since February 2022 and the third largest monthly flow ever.&nbsp;</li>
</ul>
<table border="1" cellpadding="1" cellspacing="1" style="width:500px">
<thead>
<tr>
<th scope="col">ETF</th>
<th scope="col">AUM</th>
<th scope="col">Flows in May 2023</th>
</tr>
</thead>
<tbody>
<tr>
<td>SPDR S&amp;P 500 ETF Trust</td>
<td>$397bn</td>
<td>$18.1bn</td>
</tr>
<tr>
<td>iShares Core U.S. Aggregate Bond ETF</td>
<td>$91.1bn</td>
<td>$3.2bn</td>
</tr>
<tr>
<td>Invesco QQQ Trust</td>
<td>$189bn</td>
<td>$1.8bn</td>
</tr>
<tr>
<td>Vanguard Growth ETF</td>
<td>$86bn</td>
<td>$1.5bn</td>
</tr>
<tr>
<td>SPDR Gold Trust</td>
<td>$59.3bn</td>
<td>$0.87bn</td>
</tr>
<tr>
<td>Communication Services Select Sector SPDR Fund</td>
<td>$12.3bn</td>
<td>$0.64bn</td>
</tr>
<tr>
<td>SPDR Dow Jones Industrial Average ETF Trust</td>
<td>$27.7bn</td>
<td>$0.23bn</td>
</tr>
<tr>
<td>Technology Select Sector SPDR Fund</td>
<td>$47bn</td>
<td>$0.02bn</td>
</tr>
<tr>
<td>Energy Select Sector SPDR Fund</td>
<td>$33bn</td>
<td>-$1.6bn</td>
</tr>
<tr>
<td>Financial Select Sector SPDR Fund</td>
<td>$28.6bn</td>
<td>-$2.4bn</td>
</tr>
<tr>
<td>Vanguard Value ETF</td>
<td>$94.5bn</td>
<td>-$3.8bn</td>
</tr>
</tbody>
</table>
Read now:&nbsp;<a href="https://www.benzinga.com/markets/penny-stocks/23/06/32672024/short-interest-sector-focus-consumer-cyclical-sector" target="_blank">Short Interest Sector Focus: Consumer Cyclical Sector</a>
Photo: Shutterstock
<ul>
</ul>
&nbsp;

AAPL

AMZN

SPDR Dow Jones Industrial Average ETF Trust

GOOG

GOOGL

MSFT

NVDA

ETFs Flows to Watch: SPY Attracts Staggering $18B Inflows in May, The Highest Since December 2021, As Investors Jump On AI Rally

&lsquo;Big Short&rsquo; investor <a href="https://www.benzinga.com/topic/michael-burry">Michael Burry</a>&nbsp;expressed skepticism on the&nbsp;global economic environment and questioned whether it could be worse than the 2008 financial crisis in September 2022.
What Happened: The investor, who made his fortune betting against the housing market in the years leading to 2008, shared a link to a story that discussed the Dow&rsquo;s largest single-day drop on Sept. 29, 2008, when the House voted against a proposed $700-billion rescue of the financial system. The index had dropped 777 points, its largest single-day drop in history until that point.
See Also: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/02/31000993/jim-cramer-lists-6-conditions-for-market-selloff-to-end-amid-discouraging-inflation">Jim Cramer Lists 6 Conditions For Market Selloff To End Amid &#39;Discouraging&#39; Inflation Data</a>
&ldquo;I wondered aloud if this could be worse than 2008. What interest rates are doing, exchange rates globally, central banks seem reactionary and in CYA mode. One of my analysts said it was spooky that today I would wonder that alpine. Anniversary,&rdquo; Burry said in a tweet that he deleted later.
Interestingly, the Dow witnessed more intense single-day drops until Sept. 30, 2022. During the pandemic year of 2020, the index witnessed single-day drops of over 7% three times in the month of March.
Why It&#39;s Important: Burry&rsquo;s skepticism came at a time when rising interest rates and persisting hawkishness among central bankers battered global assets. The hawkish stance adopted by the U.S. Fed, despite signs of inflation having peaked at the time, kept the markets extremely <a href="https://www.benzinga.com/money/most-volatile-stocks/">volatile</a>. Experts like ARK Investment Management&rsquo;s Cathie Wood&nbsp;criticized the U.S. Fed&rsquo;s policy stating it is significantly more restrictive than in the 1980s.
The <a href="https://www.benzinga.com/money/vanguard-review/">Vanguard</a> Total Bond Market Index Fund ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/bnd#NASDAQ">BND</a>) and the iShares Core US Aggregate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>) lost over 4% in a one-month period leading up to Sept. 30, 2022. The SPDR S&amp;P 500 ETF Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/spy#NYSE">SPY</a>), which tracks the S&amp;P 500, was down over 8% from the beginning of the year until Sept. 30, 2022.
This story was originally published on Sept. 30, 2022.
Read Next:&nbsp;<a href="https://www.benzinga.com/news/23/02/31000757/rob-reich-thinks-kitchen-tables-are-better-economic-indicators-than-stock-markets-gdp-in-america-its">Rob Reich Thinks Kitchen Tables Are Better Economic Indicators Than Stock Markets, GDP: &#39;In America, It&#39;s Expensive Just To Be Alive&#39;</a>

Short Ideas

Global

The Day 'Big Short' Investor Michael Burry Reminisced About Dow's Largest Single-Day Fall In 2008: Wondered 'If This Could Be Worse'

As the Federal Reserve hiked its policy rate by over four percentage points in 2022&nbsp;to tackle rising inflation, the U.S. Treasury market <a href="https://www.benzinga.com/news/23/01/30248114/dragged-by-inflation-treasuries-reportedly-register-biggest-annual-loss-in-2022">registered a record annual loss.</a>
The U.S. bond market index declined 12.5% during the year, the most in its history, reported Bloomberg. The worst months for the index were in September (-3.45%), March (-3.11%) and April (-3.10%).
Also Read: <a href="https://www.benzinga.com/money/how-to-invest-in-startups">How To Invest In Startups</a>
El-Erian&#39;s Take: Allianz chief economic adviser and noted economist Mohamed El-Erian believes there is more enthusiasm pertaining to bonds after their downbeat performance in 2022.
&ldquo;While analysts are unusually cautious about the prospects for stocks, there&rsquo;s more enthusiasm for bonds after their horrid 2022 performance due to the view that central banks are mostly done hiking. A more differentiated view of bonds is warranted as credit risk is far from done,&rdquo; El-Erian tweeted.
Benzinga&rsquo;s Take: After a horrible rout, markets often seem to have a tendency to deviate towards the mean reversion theory where they expect the asset class to post a better performance and pare some losses. However, as El-Erian noted, a differentiated view of the bond market is vital in current times given&nbsp;that the possibility of&nbsp;both recession and credit risk exist.
Price Action: Yields hit their highest in the October-November period following which they started declining as inflation began showing moderation and <a href="https://www.benzinga.com/analyst-ratings/analyst-color/23/01/30183415/proceed-with-caution-what-nouriel-roubini-larry-summers-and-mohamed-el-erian-say-ab">Federal Reserve officials slowed the pace of policy tightening</a>. The Vanguard Total Bond Market Index Fund ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/bnd#NASDAQ">BND</a>) and the iShares Core US Aggregate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>) lost over 14% in the last year.
Read Next: <a href="https://www.benzinga.com/news/23/01/30247928/paul-krugman-says-controlling-inflation-by-inducing-recession-is-like-stopping-the-action-on-the-fie">Paul Krugman Says Controlling Inflation By Inducing Recession Is Like &#39;Stopping The Action On The Field Until Everyone Sits Down&#39;</a>
<a href="https://www.flickr.com/photos/imfphoto/33371463163/in/photolist-SQVtmx-zLwMGN-TT2wht-TT2uwp-dgtWd4-dgu2TB-zLFjen-U21SxN-JqTcVW-KnosUx-dgu1Sp-dgtX99-dgtY2Q-dgu3CP-2nSHUQG-AGmBcd-apxFA9-dgu4tM-apuYVM-AFgFad-dgu2xT-dgu1Ud-dgu2N5-apxFyw-zLF4N8-dgu51L-apxFME-AGmJzQ-dgtYAQ-dgu4dz-AHy2FZ-AGmNyS-AqX4MJ-apuYE2-AqXdNj-AGmLou-apxFSU-apxFW5-AFgT1N-apuYRp-apxFsU-apxFvq-zLxawj-apxFES-dgu3FC-apuYLM-apuYSR-dgtYc9-apxFPd-dgu43L" target="_blank">Photo</a>&nbsp;by IMF on Flickr

Top Economist El-Erian Thinks Bonds Warrant A 'More Differentiated' View As Credit Risk Is Far From Done

As the<a href="https://www.benzinga.com/analyst-ratings/analyst-color/22/12/30085507/bill-ackman-says-feds-2-inflation-target-no-longer-credible-cant-change-its-target-"> Federal Reserve hiked its policy rate</a> by over four percentage points in 2022 to tackle rising inflation, the U.S. Treasury market registered a record annual loss during the year.
What Happened: The U.S. bond market index declined 12.5% during the year, the most in its history, reported Bloomberg. The worst months for the index were September (-3.45%), March (-3.11%) and April (-3.10%), the <a href="https://www.bloomberg.com/news/articles/2022-12-31/treasuries-post-biggest-annual-loss-ever-as-inflation-takes-toll?srnd=markets-vp&amp;leadSource=uverify%20wall">report </a>said.
See Also: <a href="https://www.benzinga.com/money/how-to-invest-in-startups">How To Invest In Startups</a>
Yields hit their highest in the October-November period following which they started declining as inflation began to show moderation and <a href="https://www.benzinga.com/news/22/12/29935234/cramer-says-powells-inflation-remarks-confirm-investors-shouldnt-exit-we-must-be-ready-with-a-quarte">Federal Reserve officials slowed the pace</a> of policy tightening.
Inversion: The yield curve inverted, with rates for five-year treasury notes first surpassing those for 30-year securities in March, while the gap between two- and 10-year yields also flipped. The report said that these <a href="https://www.benzinga.com/analyst-ratings/analyst-color/22/12/29993462/cathie-wood-warns-ahead-of-fomc-meeting-that-the-fed-is-making-a-serious-mistake-as">inversions hit historic extremes</a>, implying that investors anticipate high short-term yields to cause economic damage.
The inversion of the two- to 10-year curve hit as much as 85.2 basis points on Dec. 7, before concluding 2022 at close to 56 basis points. The five-year premium over the 30-year rate at one point hit as much as 46.8 basis points, the report stated.
The Vanguard Total Bond Market Index Fund ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/bnd#NASDAQ">BND</a>) and the iShares Core US Aggregate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>) lost over 14% in the last one year.
2023 Outlook: For 2023, many US interest-rate strategists believe that as long as labor-market conditions soften and inflation declines further, treasuries will extend their recent rally, taking yields lower and steepening the curve in the second half of the year, the report said.
Read Next: <a href="https://www.benzinga.com/government/23/01/30247952/michael-burry-criticizes-eu-over-windfall-levy-on-oil-companies-short-signed-is-the-realm-in-which-a">Michael Burry Criticizes EU Over Windfall Levy On Oil Companies: &#39;Short-Signed Is The Realm In Which All Governments Operate&#39;</a>

Dragged By Inflation, Treasuries Reportedly Register Biggest Annual Loss In 2022

Investors often short stocks to hedge positions against long positions or as a way to bet against a particular company. Benzinga provides a look at the <a href="https://www.benzinga.com/short-interest/most-shorted">most shorted stocks here.</a>
Exchange traded funds offer investors a way to get exposure to the overall market, certain sectors or countries by providing an investment of a basket of stocks.
A new report from S3 Partners and managing director of predictive analytics Ihor Dusaniwsky shows the most shorted ETFs, which ETFs have the highest short interest and which ETFs saw the biggest inflows of new shorts in the last 30 days.
Top Shorted ETFs: The report dives into the most shorted ETFs, and many of them are familiar names that cover the overall broader market. Other names are related to certain sectors.
Overall, there is $214.3 billion in short interest in 3,350 ETFs tracked by S3, down from $215 billion 30 days ago.
ETFs have an average of 16.4% short interest and cost to borrow of $1.02%. This compares to average short interest of 4.86% for U.S. stocks and a cost to borrow of 0.65%.
1. SPDR S&amp;P 500 ETF Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/spy#NYSE">SPY</a>): $53.7 billion short, 14.28% short float, 0.3% cost to borrow
2. Invesco QQQ Trust (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/qqq#NASDAQ">QQQ</a>): $20.2 billion short, 12.47% short float, 0.3% cost to borrow
3. iShares Russell 2000 (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/iwm#NYSE">IWM</a>): $18.4 billion short, 33.22% short float, 0.94% cost to borrow
4. iShares iBoxx High Yield Corporate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/hyg#NYSE">HYG</a>): $6.8 billion short, 38.8% short float, 2.82% cost to borrow
5. iShares MSCI Emerging Markets (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/em#NYSE">EM</a>): $5.1 billion short, 22.96% short float, 0.3% cost to borrow
6. SPDR Energy Select Sector ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xle#NYSE">XLE</a>): $4.4 billion short, 9.82% short float, 0.3% cost to borrow
7. iShares MSCI EAFE ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/efa#NYSE">EFA</a>): $3.7 billion short, 8.22% short float, 0.3% cost to borrow
8. iShares iBoxx Investment Grade Corporate Bond (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/lqd#NYSE">LQD</a>): $3.6 billion short, 8.88% short float, 0.3% cost to borrow
9. SPDR Financial Select Sector (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xlf#NYSE">XLF</a>): $2.9 billion short, 8.85% short float, 0.3% cost to borrow
10. SPDR S&amp;P Biotech (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xbi#NYSE">XBI</a>): $2.8 billion short, 34.86% short float, 0.94% cost to borrow
Related Link: <a href="https://www.benzinga.com/news/22/11/29805045/paxmedica-getty-images-and-3-short-squeeze-candidates-that-could-soar-this-week">Paxmedica, Getty Images And 3 Short Squeeze Candidates That Could Soar This Week&nbsp;</a>
ETFs With Short Interest&nbsp;Rising: The report from S3 shows that investors are increasing their short bets in the ETF space in sectors like semiconductors and fixed income. Investors are also increasing short positions in ETFs covering specific countries.
The 5 ETFs that saw the biggest increase in short positions in the last 30 days are:
1. iShares iBoxx High Yield Corporate Bond ETF: $994.8 million added
2. VanEck Semiconductor ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/smh#NASDAQ">SMH</a>): $462&nbsp;million added
3. iShares Core MSCI Total International Stock ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/ixus#NASDAQ">IXUS</a>) $379.8 million added
4. SPDR Dow Jones Industrial Average ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/dia#NYSE">DIA</a>): $378.9 million added
5. iShares Core U.S. Aggregate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>): $284.5 million added
Outside of the top five ETFs with increased short&nbsp;interest, two regional ETFs were among the 10 with the largest increases.
The iShares MSCI South Korea ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ewy#NYSE">EWY</a>) saw an increase of $229.5 million in short interest in the last 30 days. The ETF now has $713.2 million in short interest, or around 22.75% of the float.
The iShares MSCI Brazil ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ewz#NYSE">EWZ</a>) saw an increase in $225.5 million in short interest in the last 30 days. The ETF now has $1.3 billion in short interest, or around 25.35% of the float.
Highest Short Interest By Percentage: Outside of the large dollar amounts that are short particular ETFs, an indication of a high short percentage of the float could also indicate sectors and countries that are being bet against.
Here are the ETFs with the highest short interest by percentage:
1. SPDR S&amp;P Retail ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xrt#NYSE">XRT</a>): 193.88% short float, $1.1 billion total short
2. SPDR Series Trust SPDR Homebuilders ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xhb#NYSE">XHB</a>): 57.75% short float, $610.4 million total short
3. SPDR S&amp;P Oil &amp; Gas Explorer &amp; Product (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xop#NYSE">XOP</a>): 52.90% short float, $2.8 billion total short
4. iShares U.S. Home Construction ETF (BATS: <a class="ticker" href="https://www.benzinga.com/stock/itb#BATS">ITB</a>): 46.39% short float, $557.5 million total short
5. iShares iBoxx High Yield Corporate Bond ETF: 38.8% short float, $6.8 billion total short
Most Crowded Short ETFs: Another indicator of bets against an ETF covering a particular sector or region could be combining the short interest by dollars, short float percent and cost to borrow. S3 ranks the five most crowded ETFs for short interest using a scoring system.
1. SPDR S&amp;P Retail ETF 
(NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ewco#NYSE">EWCO</a>)
2. iShares iBoxx High Yield Corporate Bond ETF
3. SPDR S&amp;P Oil &amp; Gas Explorer &amp; Product
4. SPDR S&amp;P Biotech
5. Invesco S&amp;P 500 Equal Weight Communication Services 
Read Next: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/22/11/29789195/block-is-the-most-shorted-crypto-stock-how-do-coinbase-microstrategy-compare">Block Is The Most Shorted Crypto Stock, How Do Coinbase, MicroStrategy Compare</a>
Photo via Shutterstock.&nbsp;

Penny Stocks

EWCO

iShares Dow Jones US Homenstruction Index Fund

IXUS

The 10 Most Shorted ETFs: Which Sectors Saw Short Interest Increase?

&quot;Big Short&quot; investor Michael Burry has pointed out in his now-deleted tweet that rising yields across the curve despite a widespread prediction that deflation could be on the cards is likely a function of quantitative tightening.
What Happened: &ldquo;If everyone is predicting deflation because of all the obvious signs it is coming, and rates are still rising fast across the curve, what does that mean? Must be QT kicking in. September is the first $90B month,&rdquo; Burry tweeted.
<a href="https://ibb.co/4TRbV1N"><img alt="Screen-Shot-2022-09-28-at-9-17-58-AM" src="https://i.ibb.co/Nj20yTY/Screen-Shot-2022-09-28-at-9-17-58-AM.png" style="height:885px; width:650px" /></a>
Also Read: <a href="https://www.benzinga.com/real-estate/22/09/29029552/corporate-home-buying-spree-backfires-is-this-a-sign-that-michael-burrys-predictions-are-accurate">Corporate Home Buying Spree Backfires &mdash; Is This A Sign That Michael Burry&#39;s Predictions Are Accurate?</a>
What It Means: Quantitative tightening, the reverse of quantitative easing, means the practice where a central bank tries to shrink its balance sheet by offloading the bonds or treasuries it is holding. The U.S. Federal Reserve has started shrinking the size of its $9 trillion balance sheet by about $90 billion per month beginning in September.
As the supply of treasuries increases in the open market due to the Fed&rsquo;s quantitative tightening, the yields tend to take a hit. This could be a reason, as Burry pointed out, why the yields are rising across the curve despite the whole talk about deflation.
On Velocity: Burry also tweeted about rising velocity citing a scenario from 1978-79. &ldquo;Velocity is nominal GDP/Money Supply (M2 here). QT+ higher rates starting to push M2 down. Yet we are seeing a tick-up in velocity, emerging from narrative obscurity. In 1978-79, rising velocity trumped falling money supply to drive inflation higher and higher. Redux would shock.&rdquo;
Price Action: Fixed income assets usually tend to underperform during a rising interest rate regime. The <a href="https://www.benzinga.com/money/vanguard-review/">Vanguard</a> Total Bond Market Index Fund ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/bnd#NASDAQ">BND</a>) and the iShares Core US Aggregate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>) have lost over 5% in one month.

'Big Short' Investor Michael Burry Says This Could Be The Real Reason Yields Are Rising Despite Deflation Talks

Investors are eagerly anticipating the U.S. Federal Reserve&rsquo;s updated economic projections expected out&nbsp;Wednesday.
Inflation is at the forefront of many investors minds at the moment, but the latest global hedge fund manager survey from Bank of America suggests fund managers aren&rsquo;t particularly concerned about inflation.
Inflation Concerns: The Consumer Price Index climbed 5% in May, its highest growth since 2008. However, the Fed has said it expects high inflation levels in 2021 to be &ldquo;transitory&rdquo; as the economy opens up to full capacity.
Some investors are skeptical that recent inflation levels are transitory, but 72% of fund managers surveyed agreed that the current inflationary situation is only temporary. In fact, 68% of managers surveyed said it should be smooth sailing for the economy in the next couple of years and don&rsquo;t expect another recession until 2024 at the earliest.
Related Link: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/21/06/21516023/2-reasons-to-stay-overweight-on-the-financial-sector">2 Reasons To Stay Overweight On The Financial Sector</a>
But just because inflation is not a concern doesn&rsquo;t mean fund managers aren&rsquo;t expecting action from the Fed in the near term. About 63% of managers surveyed said they expect the Fed to signal a tapering of its $120 billion in monthly bond purchases in August or September.
Current Allocations: Cash levels among fund managers have dropped from 4.1% to 3.9% in the past month, and 57% of managers surveyed said any near-term correction in the stock market will ultimately be less than a 10% pullback.
Allocation to bonds is currently at a three-year low, while stock allocations are at year-to-date highs.
Bank of America found long commodities has also overtaken long Bitcoin (CRYPTO: $BTC) as the trade fund managers consider to be the &ldquo;most crowded&rdquo; at the moment.
Despite a belief that the commodity trade is crowded, it is also the most aggressive overweight allocation among fund managers relative to historical levels.
Fund managers are also overweight materials and banks and underweight bonds and utilities.
Benzinga&rsquo;s Take: To mimic fund managers&rsquo; current allocations, consider buying the Invesco Optimum Yld Dvsfd Cmd Str No K-1 ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/pdbc#NASDAQ">PDBC</a>), the Materials Select Sector SPDR Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xlb#NYSE">XLB</a>) and the SPDR S&amp;P Bank ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/kbe#NYSE">KBE</a>) and selling the iShares Core US Aggregate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>).
Investors who want to take the contrarian approach and bet against hedge funds should take the opposite side of that trade.
(Photo: <a href="https://pixabay.com/users/kalhh-86169/">Kalhh</a> via <a href="https://pixabay.com/illustrations/money-dollar-stack-funds-finance-1090815/">PIxabay</a>)

Futures

Hedge Funds

PDBC

Survey: Hedge Fund Managers Aren't Worried About Inflation

A flood of new traders joined the market in 2020 thanks to the coronavirus&nbsp;pandemic.
Most of those traders are sitting on big gains at this point thanks to a historic market rally, but much of the easy rebound money may have already been made at this point.
Looking ahead to 2021, now is the time for new investors to start thinking about positioning their portfolio for the long-term. One of the best ways to protect your 2020 gains is by taking advantage of the power of diversification.
Here&rsquo;s an introduction to diversified investing and four tips for making sure your <a href="https://www.benzinga.com/money/best-portfolio-tracker/">portfolio</a> is diversified.
Don&rsquo;t Put All Your Eggs In One Basket:&nbsp;Even if you love a particular stock or two, putting all your money in one or two companies is an unnecessarily large risk.
Lehman Brothers investors in 2007 had no idea the types of risky mortgage derivative bets banks were making behind the scenes. Enron investors had no idea the type of fraudulent accounting that was going on under their noses.
Diversify your portfolio by investing in a number of different stocks in different market sectors. Mix&nbsp;growth stocks and value stocks, technology stocks and utilities, real estate investment trusts and SPACs, U.S. dividend stocks and emerging market stocks.
Make sure you don&rsquo;t miss the next hot market sector, and don&rsquo;t get crushed by the next cold one.
Take Advantage Of Mutual Funds, ETFs:&nbsp;In 2021, it&rsquo;s never been easier to diversify your portfolio by taking advantage of mutual funds and ETFs. If you want to have individual stocks like Tesla Inc (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/tsla#NASDAQ">TSLA</a>), Apple, Inc. (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/aapl#NASDAQ">AAPL</a>) and Walt Disney Co (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/dis#NYSE">DIS</a>) as core holdings, there&rsquo;s nothing wrong with that.
At the same time, try to&nbsp;allocate a large percentage of your portfolio to diversified ETFs, such as the SPDR S&amp;P 500 ETF Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/spy#NYSE">SPY</a>), the iShares Core S&amp;P 500 ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ivv#NYSE">IVV</a>) and the Vanguard Total Stock Market Index Fund ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vti#NYSE">VTI</a>).
With just one click, your portfolio can go from three holdings to hundreds or even thousands of holdings thanks to the diversification power of ETFs.
Think Outside The Stock Market:&nbsp;Not only should your portfolio contain a diversified mix of stocks, it should also contain a diversified mix of asset classes. A truly diversified portfolio will have at least some <a href="https://www.benzinga.com/money/what-is-asset-allocation/">allocation to assets</a> such as bonds, commodities, real estate, cash, gold or even <a href="https://www.benzinga.com/money/best-crypto-app/">cryptocurrency</a>.
Here are some of the most popular funds to consider to diversify outside of the stock market:
<ul>
<li>iShares Core US Aggregate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>)</li>
<li>SPDR Gold Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/gld#NYSE">GLD</a>)</li>
<li>Vanguard Real Estate Index Fund ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vnq#NYSE">VNQ</a>)</li>
<li>Invesco Optimum Yld Dvsfd Cmd Str No K-1 ETF (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/pdbc#NASDAQ">PDBC</a>)</li>
<li>Grayscale Bitcoin Trust (Btc) (OTC: <a class="ticker" href="https://www.benzinga.com/stock/gbtc#OTC">GBTC</a>)</li>
</ul>
Consider Your Investing Time Horizon: If you&rsquo;re relatively young, you can safely take a much more aggressive approach to investing than if you are approaching retirement.
From <a href="https://www.fool.com/investing/how-to-invest/portfolio-diversification/">1926 to 2018</a>, a portfolio of 100% stocks averaged roughly a 10.1% average annual return. However, that portfolio also generated an annual net loss in 26 out of 93 years, or about 28% of the time.
During the same stretch, a portfolio of 80% bonds and just 20% stocks generated an average annual return of only 5.3%, but it produced an annual net loss in just 13 out of the 93 years, or about 14% of the time.
Typically, the older you are, the more conservative you want to be with your investments. Stocks are considered among the highest-risk investments, whereas certificates of deposit and U.S. Treasury bonds are among the <a href="https://www.benzinga.com/money/best-low-risk-investments/">lowest-risk investments</a>.

Long Ideas

Education

GBTC

TSLA

Beginning Investor? Here's How To Protect Your Portfolio In 2021

After a huge second half of 2020, the S&amp;P 500 is off to another hot start to 2021. With stock market valuations getting more bloated by the week, there are plenty of skeptics that believe certain stocks and sectors have come too far too fast.
There is currently $244 billion in aggregate domestic ETF short interest, according to S3 Partners analyst Ihor Dusaniwsky. Over the past month, Dusaniwsky said short sellers have increased their exposure by about $14 billion.
Related Link: <a href="https://www.benzinga.com/analyst-ratings/analyst-color/21/02/19677086/heres-where-to-look-for-a-short-squeeze-in-the-reopening-restaurant-space">Here&#39;s Where To Look For A Short Squeeze In The Reopening Restaurant Space</a>
As of Wednesday, here are the six most heavily shorted domestic ETFs:
<ul>
<li>SPDR S&amp;P 500 ETF Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/spy#NYSE">SPY</a>), $60.5 billion in short interest.</li>
<li>iShares Russell 2000 Index (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/iwm#NYSE">IWM</a>), $20.9 billion in short interest.</li>
<li>PowerShares QQQ Trust, Series 1 (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/qqq#NASDAQ">QQQ</a>), $19.7 billion in short interest.</li>
<li>iShares iBoxx $ High Yid Corp Bond (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/hyg#NYSE">HYG</a>), $11 billion in short interest.</li>
<li>iShares MSCI Emerging Markets Indx (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/eem#NYSE">EEM</a>) 2.12%, $9.5 billion in short interest.</li>
<li>SPDR S&amp;P Biotech (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xbi#NYSE">XBI</a>), $7.9 billion in short interest.</li>
</ul>
Short Percent Of Float: By far the most heavily shorted ETF is the SPY ETF, which tracks the S&amp;P 500 and represents a simple bet against the U.S. stock market and/or a hedge against long positions in U.S. stocks. In the past 30 days, SPY short interest has increased by $4.8 billion. When it comes to short percent of float, however, the XBI Biotech ETF has the highest of the six ETFs mentioned above at 94%.
While it didn&rsquo;t crack the top six, Dusaniwsky said the SPDR S&amp;P Oil &amp; Gas Exploration &amp; Production ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xop#NYSE">XOP</a>) has seen the largest percent increase in short interest so far in 2021. XOP short increase is up 27% to $2.6 billion year-to-date.
At the same time, short sellers have been jumping ship on the iShares Core US Aggregate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>). AGG fund short interest is down 42% year-to-date to $1.9 billion.
Here are the six ETFs with at least $25 million in short interest that have the highest short percent of float, according to S3:
<ul>
<li>SPDR S&amp;P Retail (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xrt#NYSE">XRT</a>), 195% of float.</li>
<li>SPDR S&amp;P Biotech (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xbi#NYSE">XBI</a>), 94% of float.</li>
<li>SPDR S&amp;P Oil &amp; Gas Exploration &amp; Production ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xop#NYSE">XOP</a>), 89.7% of float.</li>
<li>iShares iBoxx $ High Yield Corporate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/hyg#NYSE">HYG</a>), 49.4% of float.</li>
<li>SPDR S&amp;P Regional Banking ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/kre#NYSE">KRE</a>), 44.1% of float.</li>
<li>iShares Expanded Tech-Software Sector ETF (BATS: <a class="ticker" href="https://www.benzinga.com/stock/igv#BATS">IGV</a>), 39.4% of float.</li>
</ul>
Benzinga&rsquo;s Take: The highest short percent of floats data is an indication of where short sellers see the most potential weakness in the market. Short sellers are betting most aggressively against retail stocks, volatility and biotech stocks.

Biotech

Short Sellers Still Targeting Retail, Biotech ETFs

In the world of exchange traded funds, it&#39;s often said that $100 million in assets is what an issuer needs to turn a profit on a particular fund. Of course, making it to $1 billion is impressive and $10 billion is rarefied air.
<h3>What Happened</h3>
Speaking of exclusivity, $100 billion is truly elite company in the ETF space, but that club got a new member last week with the addition of the PowerShares QQQ (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/qqq#NASDAQ">QQQ</a>). Bolstered by the leadership of technology and communication services equities, the Nasdaq-100 index &mdash; QQQ&#39;s underlying benchmark &mdash; recently <a href="https://www.benzinga.com/trading-ideas/long-ideas/20/05/16007402/with-this-nasdaq-100-soaring-dont-forget-this-etf">returned to positive territory</a> while the S&amp;P 500 still labors in the red following the coronavirus March meltdown.
Year to date, investors added $9.37 billion to QQQ &mdash; a total surpassed by just five other ETFs &mdash; vaulting the fund to nearly $104 billion in assets under management.
<h3>Why It&#39;s Important</h3>
The only U.S.-listed ETFs larger than QQQ are the SPDR S&amp;P 500 ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/spy#NYSE">SPY</a>), iShares Core S&amp;P 500 ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ivv#NYSE">IVV</a>), Vanguard S&amp;P 500 ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/voo#NYSE">VOO</a>) and the Vanguard Total Stock Market ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/vti#NYSE">VTI</a>).
&ldquo;CFRA rates QQQ as a five-star diversified U.S. equity fund, believing it has a high probability of outperforming in the next nine months due to its low costs and high reward potential, despite slightly elevated risks,&rdquo; said <a href="https://www.cfraresearch.com/">CFRA Research </a>Director of ETF &amp; Mutual Fund Research Todd Rosenbluth in a Tuesday note.
At $71.24 billion in assets under management, the iShares Core U.S. Aggregate Bond ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>) is the next closest ETF to QQQ on the assets totem pole, but it could be awhile before the bond fund joins the $100 billion club.
&ldquo;CFRA thinks it could be three or more years before another fund joins the $100 billion club given competitive pressure and modest returns for bond funds. But actions by the Federal Reserve could boost one fund into the upper echelon,&rdquo; said Rosenbluth.
<h3>What&#39;s Next</h3>
Past performance is never a guarantee of future returns, but with the sectors QQQ is heavy performing well this year, it&#39;s hard to imagine investors won&#39;t remain fond of the fund. Plus, QQQ has history on its side when it comes to outperforming the aforementioned S&amp;P 500 ETFs.
&ldquo;The Nasdaq-100 is heavily allocated towards top performing industries such as Technology, Consumer Services, and Health Care, which have helped the Nasdaq-100 outperform the S&amp;P 500 by a wide margin between Dec. 31, 2007 and March. 31, 2020,&rdquo; <a href="https://www.nasdaq.com/articles/when-performance-matters:-nasdaq-100-vs.-sp-500-2020-04-24">according to Nasdaq Global Indexes</a>.
The Nasdaq-100 beat the S&amp;P 500 in 10 of those 12 years.
Photo credit: <a href="https://www.flickr.com/photos/61368956@N00/3100369536">bfishadow, Flickr</a>

The QQQ ETF Joins Exclusive $100B Club

ETF short interest can shed light for traders on areas of the market where investors see potential weakness.
S3 Partners analyst Ihor Dusaniwsky&nbsp;released his latest list of ETFs with the most short interest on Wednesday.&nbsp;Total short interest in the 2,200 domestic ETFs that S3 tracks was up $4.77 billion to $159 billion last week, Dusaniwsky said.&nbsp;
&ldquo;ETF short sellers continue to make fixed income ETF&rsquo;s a popular short for both hedging and outright trading purposes, as five out of the top 20 ETF shorts are fixed-income ETFs,&rdquo; he said.
<h3>Most Shorted ETFs</h3>
The following are the 16 ETFs with the highest short interest, according to S3:
<ul>
<li>SPDR S&amp;P 500 ETF Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/spy#NYSE">SPY</a>), $42.12 billion.</li>
<li>iShares Russell 2000 Index (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/iwm#NYSE">IWM</a>), $11.37 billion.</li>
<li>PowerShares QQQ Trust, Series 1 (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/qqq#NASDAQ">QQQ</a>), $9.51 billion.</li>
<li>iShares MSCI Emerging Markets Indx (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/eem#NYSE">EEM</a>), $5.54 billion.</li>
<li>iShares iBoxx $ High Yid Corp Bond (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/hyg#NYSE">HYG</a>), $5.16 billion.</li>
<li>iShares IBoxx $ Invest Grade Corp Bd Fd (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/lqd#NYSE">LQD</a>), $3.6&nbsp;billion.</li>
<li>Utilities SPDR (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xlu#NYSE">XLU</a>), $3.28 billion.</li>
<li>SPDR S&amp;P Biotech (NYSEARCA: XBI), $3.27 billion.</li>
<li>iShares Barclays Aggregate Bond Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/agg#NYSE">AGG</a>), $3.08 billion.</li>
<li>iShares Barclays 20+ Yr Treas.Bond (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/tlt#NASDAQ">TLT</a>), $3.03 billion.</li>
<li>iShares MSCI EAFE Index Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/efa#NYSE">EFA</a>), $2.91 billion.</li>
<li>Financial Select Sector SPDR Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xlf#NYSE">XLF</a>), $2.51 billion.</li>
<li>Industrial Select Sector SPDR Fund (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xli#NYSE">XLI</a>), $2.48 billion.</li>
<li>ISHARES TR/JPMORGAN USD EMERGI (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/emb#NASDAQ">EMB</a>), $2.46 billion.</li>
<li>SPDR Gold Trust (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/gld#NYSE">GLD</a>), $2.17 billion.</li>
<li>SPDR Dow Jones Industrial Average ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/dia#NYSE">DIA</a>), $2.07 billion.</li>
</ul>
<h3>Benzinga&rsquo;s Take</h3>
It shouldn&rsquo;t be worrying that the SPY ETF is the largest short position by far. It doesn&rsquo;t necessarily mean investors are bearish about the market given that shorting the SPY ETF is one of the most popular ways for investors to hedge against their long stock positions.
Do you agree with this take? Email&nbsp;<a href="mailto:feedback@benzinga.com">feedback@benzinga.com</a>&nbsp;with your thoughts.
Related Links:
<a href="https://www.benzinga.com/top-stories/19/09/14481041/14-lowest-peg-ratios-in-the-s-p-500">14 Lowest PEG Ratios In The S&amp;P 500</a> 
<a href="https://www.benzinga.com/analyst-ratings/analyst-color/19/09/14473044/10-stocks-where-short-sellers-are-throwing-in-the-towel">10 Stocks Where Short Sellers Are Throwing In The Towel</a>