Investing strategy, recommendations for bond-market bubble: Nancy Davis - Business Insider

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Nancy Davis has a pristine track record of calling recent market meltdowns. She outlines a new bubble that's building in the bond market — and offers 3 strategies for taking advantage.

Davis is the founder and chief investment officer of asset manager Quadratic Capital Management. She also manages its exchange-traded fund, which is designed to protect against inflation and volatility in interest rates. Last month ETF.com named IVOL the best new fixed income ETF of 2019 and praised its innovative approach.

Asked about her biggest economic concerns facing markets today, Davis said she's worried that the Federal Reserve'sprograms are aimed in the wrong direction. She told Business Insider that by buying long-dated government bonds, the Fed might be impeding its own rescue efforts and creating a bubble. She's concerned the Fed might end up following in the footsteps of the European Central Bank and the Bank of Japan. By buying those long-term bonds, she argues, the Fed is failing to encourage lending and is just pushing people to buy and hold those bonds instead of investing in stocks or growth.

In this unprecedented market, Davis emphasizes that investors need to diversify beyond stocks and bonds. She warns that one of the typical alternative assets, credit, is not ideal because its performance is generally going to mirror that of stocks. Here are three areas where she sees notable opportunity.This is one of the key reasons Davis' IVOL ETF exists.

 

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