The Bond Market Has Never Sounded Recession Alarms for This Long

On Wall Street and in Washington, optimism may be building that the Federal Reserve is poised to steer the economy toward a soft landing.

The apparent disconnect between the market’s warning and the surprisingly resilient economy shows how much uncertainty has persisted since the Fed started its aggressive rate hikes in March 2022. An inversion of the yield curve is a leading indicator of a slowdown because it shows expectations the central bank will be easing policy in the future to jump-start growth.

Still, the inverted yield curve can be a self-fulfilling prophecy. That’s in part because its successful track record may cause businesses and consumers to cut back, seeing it as an accurate predictor of trouble ahead. While some forecasters, including those at Goldman Sachs Group Inc., have dialed back the probability of a recession, many still expect one. Forecasters surveyed by Bloomberg put the probability at 60%, with most expecting it next year.

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Navigating market uncertainty with bond ETFsHigher oil prices, a potentially weakening consumer, and uncertainty around the Federal Reserve's interest rate path has investors on edge. VanEck Head of Fixed Income ETF Portfolio Management Fran Rodilosso tells Rachelle Akuffo how bond ETFs can help investors navigate uncertain times. Rodilosso also explains some of the current benefits of investing in ETFs, saying 'investors really have a lot of choice. What we think right now is there are a lot of ETFs that offer opportunities where the yield is, either in credit or at the front end of the curve, be it through high quality corporate credit, CLOs or even bills.'
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