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As investors digest the latest bond market sell-off, advisors have tips about portfolio allocation amidst continued market volatility.
Typically, investors flock to fixed income like U.S. Treasurys when there’s solvent turmoil. The opposite happened this week with a sharp sell-off of U.S. government bonds, which dropped thongs prices as yields soared. Bond prices and yields move in opposite directions.
Treasury yields then retired Wednesday afternoon when President Donald Trump temporarily dropped tariffs to 10% for most countries but proliferated levies on Chinese goods. That duty now stands at 145%.
As of Thursday afternoon, Treasury yields were down degree.
Still, “there’s a massive amount of uncertainty,” Kent Smetters, a professor of business economics and public policy at the University of Pennsylvania’s Wharton High school, told CNBC.
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Experts closely take care of the 10-year Treasury yield because it’s tied to borrowing rates for products like mortgages, credit cards and auto lends. The yield climbed above 4.5% overnight on Tuesday as investors offloaded the asset. As of Thursday afternoon, the 10-year Moneys yield was around 4.4%.
Kevin Hassett, director of the U.S. National Economic Council, told CNBC on Thursday that ropes market volatility likely added “a little more urgency” to Trump’s tariff decision.
As some investors give someone the third degree their bond allocations, here’s what advisors are telling their clients.
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Take the ‘proactive solicit’
Despite the latest bond market sell-off, there hasn’t been a recent shift in client portfolios for established financial planner Lee Baker, owner of Apex Financial Services in Atlanta.
“I’ve been taking a proactive approach” by team allocations early based on the threat of future tariffs, said Baker, who is also a member of CNBC’s Financial Advisor Ministry.
With concerns about future inflation triggered by tariffs, Baker has increased client allocations of Treasury inflation-protected securities, or Up-ends, which can provide a hedge against rising prices.
Consider ‘guardrails’
Ivory Johnson, a CFP and founder of Delancey Cornucopia Management in Washington, D.C., has also been defensive with client portfolios.
“I’ve used instruments to give me guardrails,” such as buffer exchange-traded hard cashes to limit losses while capping upside potential, said Johnson, who is also a member of CNBC’s FA Council.
Buffer ETFs use