AGG ETF

Interest rates are historically high. Bonds often offer higher yields than REITs. Yet, REITs crush them over the long run. Here's why.

Investors have upped their interest in actively managed bond ETFs, pouring record capital into them in January as some paid up in hopes of stronger returns.

US equity markets posted modest declines this week amid a "DeepSeek" tumble, while interest rates declined to six-week lows as markets responded to the pause in the Fed's rate-cutting cycle. The Nasdaq 100 was the center of the action this week, dipping 1.4% on concern over potential competition from Chinese startup DeepSeek, which sparked a sharp sell-off in AI-darlings. Real estate equities were among the stronger performers for a third-straight week, buoyed by easing interest rates and by a relatively solid start to REIT earnings season.

Following the best week since November, U.S. markets posted their best first-week of a Presidential term since 1985 as investors saw business-friendly undertones in the early days of the new administration. Striking an agreeable tone for markets that were wary of the inflationary impacts of trade and fiscal policy, President Trump focused on supply side policies and didn't immediately implement sweeping tariffs. Posting record-highs for the first time since early December, the S&P 500 gained another 1.7% on the week, notching back-to-back weekly gains following a stretch of 4-of-5 weekly losses.

The U.S. bond market is broadly down so far this year, with funds that provide exposure to fixed-income assets hurt by a recent rapid ascent in Treasury yields.

Fixed income investors who have the majority of their portfolio in bonds are facing a heavy dose of uncertainty heading into 2025. That said, NEOS Investments has four options for income that also combines tax efficiency.

The real estate cycle will finally transition from the "Recession" phase to the "Recovery" phase in 2025. Muted supply growth will be the silver-lining to the brutal three-year bear market. False Start: REITs surged 20% leading up to the Fed's initial "jumbo" interest rate cut in September, but have hit the skids once again since the rate cuts actually began. Historically Cheap: REITs have underperformed the S&P 500 by a whopping 45 percentage points since the start of the Fed hiking cycle in 2022 - a historically remarkable underperformance gap.

These ETFs have long-term merit despite a rocky year so far.

Have you checked on your fixed income allocation lately? It's one thing to buy an ETF tracking the Bloomberg US Aggregate Index, (BBUSATR), or the AGG.