This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

The Fed Walks Backs Away From Being Calendar-Dependent

It is unlikely that we have seen the last taper scare for the year, and the one from last week may not even be over yet. If you can recognize a panic for what it is and know that there will be a snapback in short order, it should be easier for you to endure future panics.

There are multiple portfolio implications here as well. The Fed is buying assets in the open market every month and keeping interest rates near all-time lows as it tries to stimulate the economy. This will end at some point, and there will be a consequence for markets. This has been known since the Fed started its quantitative easing program, but last week shows us that even a hint of tapering will send markets lower.

In an article last week, I looked at shorter-duration corporate bond ETFs that available from Guggenheim and that allow investors to choose a targeted maturity date.

iShares offers a similar suite of municipal bond ETFs. PIMCO, iShares and SPDR all offer short-dated TIPS ETFs targeting 1-5 years, and these have worked too.

In the last month the iShares Barclays TIPS Bond Fund (TIP), which has a weighted average maturity of 8.6 years, is down 6% compared to just a 2% drop for the PIMCO 1-5 Year US TIPS Index Fund (STPZ).

The other step to take would be for anyone who has not already done so to devise an exit strategy for their longer-dated fixed-income holdings.

If the Fed is back to being more data-dependent then we may see rates go down a little over the course of the summer but probably not back to the lows.

That means the summer would be a good time to shorten your portfolio's average maturity because when the Fed really does end its asset purchases, bond prices are likely to go down much more than they have in the last month.

At the time of publication, Nusbaum held shares of STPZ. His firm also held STPZ on behalf of clients.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
STPZ $51.90 0.00%
TIP $113.59 0.00%
AAPL $124.43 0.00%
FB $82.22 0.00%
GOOG $548.00 0.00%

Markets

DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs