The iShares 7-10 Year Treasury Bond ETF (IEF) is now more than 3% off its low and the iShares MBS ETF (MBB) is almost back to its 200-day moving average. Both of these are positive signs that we are seeing at least a temporary reprieve from rising interest rates and demand is returning to the bond market. I have been advocating moving to the shorter end of the bond spectrum and lowering the credit quality of your holdings to areas that are continuing to outperform. This will help insulate your portfolio from too much interest rate risk and add higher yielding securities to generate income.
The Final Word: I believe the fourth quarter is going to present many opportunities, as we have seen in past years. The key will be to stay on top of the changing trends in each sector and take advantage of dislocations in value.
I would keep a balanced mindset that takes into account both sides of the trade and not get overzealous with any individual holdings. Remember that complacency can be dangerous, especially in a market that hasn't had a significant correction all year long.
At the time of publication the author had a position in USMV.Follow @fabiancapital This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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