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ChartBrief 89 - The search for yield continues

June 27, 2017

If the amount of AUM in yield and income related ETFs is anything to go by, it would seem that the search for yield is alive and well.  By our count the amount of ETF AUM in yield product has surged to over half a trillion dollars.  And it's worth highlighting as you check out the chart that not all yield is created equal.  Indeed the lust for investment income has seen a lot of investors stretching into assets with increasing liquidity risk, credit risk, commodity risk, interest rate risk, and even equity market risk.  

 

With demographic drivers and still low cash rates around the world the income asset bubble could go on for a while yet.  Particularly as US bond yields look to be rolling over.  Indeed bond yields are going to be a key risk driver for income assets, and for now they are sort of in limbo at a point where a trend change from down to up has yet to really take hold.  The impact of Fed balance sheet normalization or QT [Quantitative Tightening] could cause shockwaves through yield product when it comes, so it's worth remembering the point that income assets aren't always low risk assets...

 

Things that make you go (a)UMmmm... AUM [Assets Under Management] in income or yield focused ETFs has surged to over half a trillion dollars.

 

The US 10-Year Government bond yield looks like it is attempting to continue back on its downtrend after a brief breakout last year. The outlook for bond yields depends on the global economy, as previously noted.

 

 

For more and deeper insights on the global markets, good charts, and actionable investment ideas you may want to subscribe to the Weekly Macro Themes - our institutional service.  Click through for a FREE TRIAL.

 

 

 

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