The yield curve will continue to flatten and invert as investors come to grips with the reality of aggressive Fed tightening and slowing economic growth. Yields will rise and remain elevated until inflation abates.

Russian aggression is here to stay. Russia is attacking Ukraine militarily and conducting cyber attacks globally. Have you noticed increasing computer glitches? I have encountered multiple restaurants that excused checks due to system failures—without their computers they had no idea who owed what.

The spike in oil prices will stoke demand for inflation protection and give Fed Chair Powell all the ammo he needs to raise rates half of a percent in May. We expect Fed Funds to reach 2.0% by November.

Investors might feel like there is nowhere to hide with both stocks and bonds getting beat up this year. But floating rate bonds, residential real estate REIT bonds as an inflation hedge, defense stocks and bonds (especially cyber security), and nearly all energy plays seem to make sense for 2022. Our short-term bond ETF, VALT, is poised to rebound with 70% of the portfolio invested in floating rate securities that is anticipated to benefit from Fed rates increasing.

Recession clouds are forming for 2023, so remember when investing, what works one year, typically doesn’t work the next year.

Carefully consider the Fund’s investment objectives, risks, and charges and expenses before investing. This and other information can be found in the Fund’s summary or statutory prospectuses, available on Please read the prospectus carefully before investing. Past performance is not indicative of future results.

Investing involves risk, including loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility.

ETF Managers Group is the investment adviser to the Fund’s.  The Fund’s are distributed by ETFMG Financial LLC.  ETF Managers Group LLC and ETFMG Financial LLC are wholly owned subsidiaries of Exchange Traded Managers Group LLC (collectively, “ETFMG”).  ETFMG is not affiliated with Sit Fixed Income Advisors II, LLC or any of its affiliates.

Author Portrait
Bryce Doty is a Senior Vice President with Sit Fixed Income and Senior Portfolio Manager of the taxable bond portfolios for the firm’s custom separately-managed accounts, private investment funds, and mutual funds. Bryce oversees the firm’s team of taxable bond managers, analysts, and traders.