Advisors and investors evaluating areas of 2025 opportunity in the fixed income market might do well to consider muni bonds and the related ETFs. That thesis could be bolstered with the benefits of active management, accessible via the ALPS Intermediate Municipal Bond ETF (MNBD).
2025 is right around the corner. Advisors and investors are evaluating which asset classes could deliver the goods in the new year.
Since the birth of the U.S. ETF industry in 1993, actively managed mutual funds have bled $5 trillion in assets, per recent analysis by BofA. Much of that shift has benefited ETFs as advisors and investors gravitated to passive products with lower fees.
The October jobs report, released last Friday, coupled with more downward revisions to monthly employment numbers, spooked some market participants. It also reignited talk about a looming recession.
It's not yet clear who will occupy the White House in 2025. It's also not known what the makeup of the two chambers of Congress will look like.
Municipal bonds and related ETFs aren't the most adventurous fixed income assets. That's usually why income investors, including retirees, embrace the asset class.
The Federal Reserve nearing its first interest rate cut since 2020. So enthusiasm for fixed income assets is increasing, and muni bonds are part of that trend.
It appears probable that the U.S. economy will avert a recession. Additionally, it's increasingly likely the Federal Reserve will soon lower interest rates to juice economic activity.
In terms of population, the universe of actively managed municipal bond exchange traded funds is growing at a prodigious pace. That makes sense because there are multiple reasons why the combination of municipal bonds and active management can reward investors.
Broad measures of investment-grade municipal bonds didn't do much of anything in the first half of 2024. However, some market observers believe the asset class could be poised for some upside as the second half unfolds.
As measured by the widely followed ICE AMT-Free US National Municipal Index, muni bonds are sporting modest losses over the past month and on a year-to-date basis. However, it's not all bad news when it comes to municipal debt.
Active ETFs have had their coming-out party over the last two years. Asset managers and investors alike are coming to the vehicle's active variant in droves thanks to the combination of transparency, tax advantages, and manager expertise.