- There have been many changes over the years, both technologically and economically
- Just as we are open to new ideas in our daily life, we should make sure we are equally open to investment ideas.
- In a time of economic uncertainty, limited-term bonds can be a missed asset.
It’s really amazing the changes technology has made in our lives the last several years.
Technology has changed the way many of us communicate with one another, travel short distances, shop, invest, watch television, rent movies, take photos and pay our bills. I think about how hard it was to plan trips before we had the internet to help us buy our airline tickets, book hotels, and learn about our destinations. Things have changed so much in such a short time. These changes are beneficial to enhancing our lives in so many ways, yet can be disruptive to the status quo, along with the industries and companies that must now compete with the new technologies.
The markets and economy have seen a lot of changes too. After the Great Depression, we saw President Roosevelt and Congress work together to set up programs and enact fiscal stimulus to put people back to work and revive the economy. While some similar attempts were made after our recent Great Recession, the fiscal policies enacted were not as robust and, while stemming the tide of loss, were not enough to bring back a great deal of new economic growth. The last several years have been challenging, with very little agreement in Washington on fiscal policies to promote growth. The heavy lifting has been left to the Federal Reserve and monetary policy. I believe the Federal Reserve and its Federal Open Market Committee did what they could to stimulate the economy, but I also believe monetary policy alone cannot solve the problem of anemic growth.
We see and hear a lot of descriptions about the markets and the economy, but one common denominator right now is that there is a tremendous amount of uncertainty about the future. There is no doubt that technology is changing our lives dramatically and will continue to do so in ways we can’t yet even imagine. The political world looks a lot different today than it did a year ago, and no one knows for sure what will happen in November. The Federal Reserve would like to continue raising rates but the rest of the world is influencing that decision much more than it ever has before. Negative interest rates in much of the developed world would seem to make it more difficult for the Fed to tighten policy here.
Investing in a world with so much change and disruption is not easy. I feel the uncertainties present today in the world, the domestic economy and the markets all provide good reasons for an investment allocation to a short-duration bond portfolio. The Ivy Limited-Term Bond Fund, with a duration of about three years, invests primarily in U.S. Treasuries, government agency securities, government agency mortgaged-backed securities and investment-grade corporate bonds. The portfolio currently employs a slight barbell strategy, with an overweight in the very front end of the curve and a small allocation to the five- to ten-year part of the curve. The bulk of the investments have durations of one to five years. The portfolio’s composite rating is currently A+.
We love baseball in my family, and to use a few baseball terms, this is not a fund that “swings for the fences.” You will not get out-sized returns with this investment. You will, however, get a fund that aims to help to offset some of the risks taken in other parts of your portfolio. Our game plan is to get base hits and doubles and compete in our universe.
The Federal Reserve, at this writing, has had just one rate hike in this cycle. We know their desire is to try to normalize rates. There is probably room for a few more hikes in the cycle, but I am not certain rates will get back to what many of us knew as normal for quite some time. I think the Ivy Limited-Term Bond Fund will continue to do quite well in a slow and steady hiking cycle and will continue to be an important part of a diversified portfolio strategy.
Past performance is no guarantee of future results. The opinions expressed are those of the Fund’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through June 1, 2016, and are subject to change due to market conditions or other factors and no forecasts can be guaranteed. The information is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance, and time horizon.
Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the fund may fall as interest rates rise. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/ dealers.
Quality: Our preference is to always use ratings obtained from Standard & Poor’s. For securities not rated by Standard & Poor’s, ratings are obtained from Moody’s. We do not evaluate these ratings, but simply assign them to the appropriate credit quality category as determined by the rating agency.
IVY INVESTMENTS℠ refers to the financial services offered by Ivy Distributors, Inc., a FINRA member broker dealer and the distributor of IVY FUNDS® mutual funds, and those financial services offered by its affiliates. Information is subject to change and is not intended to represent any past or future investment recommendations