Traders often say “never short a boring market.” The cover article on Barron’s this past week is about an economic recovery in Japan. Premier Li Keqiang said the Chinese government will not let GDP growth slip below 7% which has raised Chinese stocks by 2% today and expectations for the initiation of new pro-growth economic policy measures. The U.S. Federal Reserve is committed to easy money for the foreseeable future. Earnings have been generally bullish and stocks are crawling forward. From an equity standpoint, we remain 100% invested.
The bond portion of your portfolio may be the bigger question. You might consider the ProShares High Yield Interest Rate Hedged ETF (HYHG) which is a high-yield bond ETF hedged against rising interest rates. The current effective duration of the fund is 0.00 years, the yield is 5.69% and the expense ratio is 0.50%. It achieves this financial distortion by going long on corporate bonds and shorting U.S. Treasuries. The yield differential between corporate junk debt and U.S. Treasuries provides the yield spread and the shorting of Treasuries provides some measure of protection against rising rates.