The market is fully betting on a rate cut from the Federal Reserve this week — the Fed's first such move in a decade — but investors continue to clamor for yield and returns in an environment of rock-bottom rates.
So, where should they turn with stocks near all-time highs and rates near all-time lows?
Tim Seymour of Seymour Asset Management said gold presents an attractive buying opportunity right now.
"If you look at gold relative to silver or relative to itself over the last three to four years, it's had that breakout this year based upon a Fed that's changed its stripes," Seymour, the firm's founder and chief investment officer, said Monday on CNBC's "ETF Edge."
The GLD — the SPDR Gold Trust — is the largest ETF to directly invest in physical gold, and has been on a tear since the end of May after a tough month for equities.
Seymour said long-term bond funds were another logical buy given a lack of a meaningful pickup in inflation.
Intermediate and long-term bond funds saw inflows of roughly $8 billion in June and July, while short-term funds suffered outflows, a sign that investors were willing to take on additional interest rate risk to chase higher returns.
Global bond yields have also sunk to record lows — with the German bund yielding -0.4% — adding further downward pressure on U.S. Treasury yields.
Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, said money has poured into bond ETFs from a mix of both buy-and-hold investors and more tactical money managers.
"Investors have rotated into intermediate and longer-term bonds," he said. "The LQD (iShares iBoxx $ Investment Grade Corporate Bond ETF) offers investment-grade corporate bond exposure, the JNK (SPDR Bloomberg Barclays High Yield Bond ETF) offers high-yield corporate bond exposure, and the TLT (iShares 20+ Year Treasury Bond ETF) has been popular with investors willing to bet the rates will be lower for longer."
Finally, investors are flocking to dividend and growth plays to capture much-needed yield.
Growth has outperformed value in 2019, with the iShares S&P 500 Growth (IVW) up 22% this year outshining the 18% return on the iShares S&P 500 Value (IVE). The IVW has larger stakes in the communication services and technology sectors, which are big momentum plays.
"What we've seen also is that investors have been rotating into higher dividend-yielding equity-oriented ETFs," said Rosenbluth.
He listed examples, such as the Vanguard High Dividend Yield Index ETF (VYM) and the iShares Core High Dividend ETF (HDV), both of which yield roughly 3% in dividends and are up roughly 13% for the year.
