Vanguard, BlackRock deliver second-half market plays that could cushion a potential growth slowdown
According to Vanguard's Roger Hallam, it's prudent for long-term investors to have sufficient exposure to fixed income in this environment.
"Our outlook for the second half of this year is that growth will slow," the firm's global head of rates told CNBC's "ETF Edge" on Monday.
Hallam predicts the labor market will continue to gradually cool while inflation rises. Hallam expects the Federal Reserve will ultimately prioritize jobs and cut interest rates toward the end of this year to provide insurance.
"We think that will provide a tailwind for bonds," he said. "So, we're confident in the outlook for fixed income, and we think... clients should be allocating to fixed income."
Vanguard is behind three U.S. government bond exchange-traded funds debuting this week. The launch includes the Vanguard Government Securities Active ETF (VGVT).
The firm's prospectus shows U.S. Treasurys hold the largest exposure in the new ETF. The benchmark 10-year Treasury note yield started 2025 at about 4.57% and has since fallen to roughly 4.4% as of Tuesday.
Meanwhile, BlackRock's Jay Jacobs sees a barbell approach as a valuable second-half strategy as a hedge against economic slowdown risks.
"I think we're still going to see a lot of money that's been in cash for a long time … start to inch their way back into the equity markets," the firm's U.S. head of equity ETFs said in the same interview.
He expects buffer ETFs, which are designed to protect against the downside and still give a measure of upside performance, to benefit from the risk backdrop.
BlackRock offers six buffer ETFs, according to the firm's website, including iShares Large Cap Max Buffer Jun ETF (MAXJ). The fund is up 5% so far this year and tracks the share price return of the iShares Core S&P 500 ETF.
"Our fund MAXJ recently reset, giving a cap of up to 7% exposure to the S&P over the next year. A tool like that is going to be very much in vogue for investors looking to get back into the markets," Jacobs said, adding investors will likely play offense and will continue to migrate toward strong macro themes such as artificial intelligence.
Jacobs also lists infrastructure as a key group.
"As we continue to see geopolitics and fragmentation around the world impact markets, I think people are going to be looking at really powerful macro trends like the growth of infrastructure in the United States as a way to place their bets in the equity markets," Jacobs said.
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