When it comes to ETFs in 2016, investors should keep an eye on the SPDR Barclays Short Term High Yield Bond ETF (SJNK), said Todd Rosenbluth, director of ETF research at S&P Capital IQ. That’s because the SJNK won’t suffer as much when the Fed hikes rates while still offering a compelling yield in a diversified portfolio. ‘You get to protect the downside by still get paid because it yields around 6%,’ said Rosenbluth. ‘We think that credit quality is still going to be relatively strong in 2016 and this is a low cost, diversified way of getting exposure to high yield.’ The SJNK has dropped 9.2% in price so far in 2015. Rosenbluth will also be watching the Vanguard Total International Bond ETF (BNDX). In his view the European Central Bank will continue to stimulate economies with bond purchases held by BNDX. This ETF, down about 2% since its launch last January, also hedges currency, limiting the negative impact of the weak Euro. When it comes to stocks, Rosenbluth has high expectations for the iShares Core S&P Small-Cap (IJR), which is down 2.2% so far this year. He said small caps have historically outperformed large caps in Presidential election years, and he also sees strong earnings growth in 2016.
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