Ease Rate-Cut Anxiety With Active Bond ETFs

Core Insights - The Federal Reserve has initiated the first rate cut of the year, with potential for more cuts before the end of 2025, prompting fixed income investors to adjust their portfolios for the changing interest rate environment [1] - A steeper yield curve is emerging as short-term rates decline, necessitating a re-strategization of portfolios to accommodate both short-term and long-term changes [2] Active ETFs Advantages - Active ETFs provide diversified exposure and flexibility in uncertain markets, allowing portfolio managers to adjust holdings based on market conditions, unlike passive funds that are tied to market value weight indexes [3][6] - The Thornburg Core Plus Bond ETF (TPLS) offers core exposure with added flexibility compared to passive funds [7] - The Thornburg Multi Sector Bond ETF (TMB) provides income diversification and active management, making it suitable for a rate-cutting environment [8] Market Dynamics - Cash and shorter-dated securities face reinvestment risk as yields fall, while longer-dated bonds may experience volatility due to various economic factors [3] - Investors are encouraged to avoid closely tracking the Fed's movements and instead leverage active ETFs to navigate the new macro environment of lower rates [4] Portfolio Management - Portfolio managers can adjust ETF holdings to capture upside or mitigate downside risk, particularly in a yield-focused fund [5] - The complexity of bond markets necessitates active management to achieve market objectives and maximize income opportunities [5]