NEW YORK (TheStreet) -- As the U.S. dollar continues to appreciate, investors need to know how the strong dollar impacts their assets, particularly in the fixed-income world. So who better to turn to than Charles Schwab's (SCHW) - Get Report fixed-income strategist Kathy Jones?
Investors should consider boosting their exposure to U.S. Treasury bonds, Jones explained to TheStreet TV's Gregg Greenberg. Furthermore, they should consider investing in longer-duration bonds, since the rising U.S. dollar will keep inflation and short-duration yields low.
U.S. investments are likely to outperform, because it's the country where the money will be flowing to from around the globe, she says. That means emerging markets, the BRIC countries -- Brazil, Russia, India and China -- and even developed foreign markets are likely to underperform.
Due the many countries' weakening currencies and falling yields, U.S. investors should reduce their international fixed-income holdings to "underweight," she advised.
"We've been pretty cautious about high-yield for a while," Jones said. Although high-yield bonds have bounced back from a recent selloff, a stronger U.S. dollar and weaker commodity prices will likely hurt the group.
About 15% of high-yield investments are oil or oil services companies, she explained. It's not that high-yield assets are poised to implode, but the risk-to-reward calculus just isn't attractive near current levels.
On the other hand, municipal bonds are still attractive. While they are fairly valued near current levels, there's still upside. 2015 will be a good year for muni bonds, just not as good as 2014, Jones concluded.
-- Written by Bret Kenwell