Don’t go all in on stocks just yet, UBS warned. The S & P 500 is up more than 2% week to date. This comes after two reports indicated inflation was easing , raising hope the Federal Reserve could tame those pressures without tipping the economy into a recession. Still, UBS advised its clients to stay with overweight bonds, a traditionally safer asset relative to equities. Mark Haefele, chief investment officer of global wealth management at UBS, pointed to three reasons for the bank’s preference toward bonds: Haefele said “good macro news is already priced into the S & P 500, in our view, setting the bar higher for the rest of the year.” He said while inflation may come down in the second half, he sees growth slowing as well, “potentially close to zero.” This would put pressure on equities going forward and bolster bonds. “The uncertain scale of the lagged effect of prior interest rate hikes means that both recession and a Fed policy error remain potential risks,” Haefele said. “Therefore, in our global strategy, we prefer to spend our risk budget in fixed income and currencies rather than overweight broad US markets,” he added. There are several exchange-traded funds investors can use to gain exposure to bonds. One of them is the Vanguard Short-Term Bond ETF (BSV) . The fund, which has an expense ratio of 0.04%, gives investors exposure to 1- to 5-year Treasurys. The fund has a year-to-date total return of 1.95%, according to FactSet. For those wanting to invest in the longer end of the curve, the iShares 20+ Year Treasury Bond ETF (TLT) may be a good fit. The fund has a total return of 3.94% in 2023, per FactSet, and an expense ratio of 0.15%. TLT YTD mountain TLT in 2023 — CNBC’s Michael Bloom contributed reporting.
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