ETFs let advisors build resilient portfolios, said Mark Alberici of State Street Investment Management
Ahead of the Fed’s rate decision this week, asset managers at the Future Proof Festival in California have been weighing the advisor impact of key ETF classes in a shifting rate environment.
Fueled by recent hotter-than-expected inflation data, the central bank is widely expected to deliver a rate hike at the Federal Reserve Open Market Committee meeting Wednesday. The CME’s FedWatch tool, which updates in real time, puts the probability of a rate hike to between 3.75% and 4% at 92.5%, up from 69.4% Friday just before the latest CPI data came out.
Mark Alberici, global head of product innovation & strategic partnerships at State Street Investment Management, told InvestmentNews that ETFs let advisors build resilient portfolios. “When rates go up you typically have a lower duration product and that could allow a client to still remain invested but not have the mark to market risks associated with long duration products,” he said, pointing to State Street’s SPDR Bloomberg 3-12 Month T-Bill ETF (Ticker: BILS) and the launch last year of its SPDR Portfolio Ultra Short T-Bill ETF (Ticker: SPTU), which has 0 to 12-month treasury exposure.
Since the Federal Reserve made its last rate cut in December 2025, the central bank has kept its policy rate steady at 3.5% to 3.75%. Inevitably, the market impact of a possible rate hike is already coming under scrutiny. In a note released on Monday, LPL Financial experts said that, after initial Fed rate hikes over the last 30 years, stocks have typically struggled before regaining their footing.
Alex Morris, CEO of F/m Investments, which is being acquired by T. Rowe Price, told InvestmentNews that fixed income ETFs were in vogue for the last rate hike cycle in 2023. “That will happen again – there will be a lot of interest in short duration cash products,” he said, citing F/m Investments’ US Treasury 3 Month Bill Fund – ETF Class Shares (Ticker: TBIL) and F/m Ultrashort Treasury Inflation-Protected Security ETF (Ticker: RBIL).
On the equity side, State Street’s Alberici pointed to the company’s exposure to key U.S. benchmarks through its SPDR Portfolio S&P 500 ETF (Ticker: SPYM) and the SPDR Dow Jones Industrial Average ETF Trust (Ticker: DIA). In late June the asset management giant launched its SPDR Portfolio Nasdaq 100 ETF (Ticker: QNDX). “[This] gives clients exposure to the lowest cost Nasdaq 100,” said Alberici. “It has already hit $400 million in inflows in the last few months.”
Alberici also highlighted the importance of alternatives as a way of generating income, citing the asset manager’s SPDR Gold Shares (Ticker: GLD) and SPDR Gold MiniShares (Ticker: GLDM) ETFs, as well as its Bridgewater All Weather ETF (Ticker: ALLW), which was launched last year. The multi-asset ETF provides consistent returns with lower volatility, he added.
Gold, however, was recently knocked off its record highs by a resurgent U.S. dollar and the looming possibility of a rate hike.
Bond ladders are also a way for advisors to immunize their exposure to rates, Alberici said. “We have a suite of ETFs which give you access to what we would call term maturity fixed income exposures, from MUNIs to corporates to high yields – we’re really seeing clients utilize each of these as building blocks specifically to address concerns about higher rate environments.”
These sentiments were echoed by F/m Investments’ Morris. “The need for fixed income is not going away anytime soon,” he said. “Rates are just not going to go back down to zero right away, there’s going to be a lot more interest in actively managed fixed income ETFs – folks are going to look for long-term, managed fixed income exposures.” F/m Investments, he explained, offers the F/m Ultrashort Tax Free Municipal ETF (Ticker: ZMUN).
Also at Future Proof, Adam Schenck, principal and managing director of fund services at actuarial consulting firm Milliman, told InvestmentNews that healthcare ETFs are also a safe haven for investors and advisors in the wake of a rate hike. Schenck, in particular, pointed to the number of breakthroughs that healthcare companies are making, and their pricing power, which remains really high.
Schenck’s company manages two healthcare ETFs – the Milliman Healthcare Inflation Guard ETF (Ticker: MHIG) and the Milliman Healthcare Inflation Plus ETF (Ticker: MHIP). “Healthcare companies just tend to have a stable, fairly inelastic demand – you can’t turn that off,” he said. “We have had a couple of folks ask about them as a hedge for AI.”