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Written by: Hal Cook | Hargreaves Lansdow
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Further interest rate cuts are expected in 2025, which could benefit bonds.
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Trump’s tariffs could be good for domestic US stocks.
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Volatility and uncertainty expected to continue, giving gold some appeal.
Many central banks around the world have cut interest rates in 2024 and it’s expected that there will be further cuts in 2025. Bond yields remain higher than they have been for some time and with rate cuts likely to continue, they remain attractive going into 2025.
At the same time, with changes in the White House and the likely implementation of tariffs, more domestically focused US companies have a potential tailwind. US small and mid-caps could be the place to be for 2025.
But with all this going on, there’s potential for volatility and uncertainty across the globe. With lots of central banks still adding to their gold reserves, investing in gold might be a useful diversifier to an investment portfolio if things get choppy. Gold has been on a great run in 2024 and is expected to hold its value next year.
An ETF is a basket of investments that usually includes shares or bonds. They tend to track the performance of an index like the FTSE 100 and trade like shares on stock exchanges. This means their prices fluctuate throughout the day. ETFs are typically low cost and as they trade like shares, they are free to hold within a fund and share account.
HL clients have access to over 1,500 ETFs and an increasing number are using ETFs as part of their portfolio, rising from 5.7% to 11.1% over the last five years.
3 ETFs that could help you invest in these areas
Global Bonds – Vanguard Global Aggregate Bond ETF
The Vanguard Global Aggregate Bond ETF invests in a range of fixed income investments. Its benchmark, the Bloomberg Global Aggregate Index Hedged GBP, is made up of a mixture of around 30,500 global bonds.
The index mostly includes global government bonds, while the rest invests in bonds issued by companies. These are all investment grade bonds that are considered more likely to pay off their debts than some higher-risk bonds, like high-yield bonds.
This ETF could provide a different type of return and help diversify an investment portfolio that already has exposure to company shares or overseas currencies.
US Smaller Companies - iShares S&P Small Cap 600 ETF
The iShares S&P Small Cap 600 ETF offers a low-cost option for tracking the performance of the S&P 600, an index which tracks the performance of smaller companies listed in the US.
This ETF could provide some diversification to an investment portfolio focused on shares in larger companies. It also provides exposure to some more domestically focused companies in the US.
Gold – iShares Physical Gold ETC
The iShares Physical Gold ETC offers a low-cost option for tracking the performance of the spot price of gold, which is the current price in the marketplace at which the commodity can be bought or sold.
This ETC aims to provide exposure to physical gold and therefore represents real gold bars held in a vault. JPMorgan act as the custodian for the gold bars, ensuring it is kept in a highly secure vault in London on behalf of ETC investors.
We think investments in a specific commodity like gold should usually only form a small part of a well-diversified investment portfolio.
Cumulative performance to end November 2024
Source: Lipper. Data to 31/11/2024
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