Market Vectors’ Fran Rodilosso: Yellen’s Comments Rattled the Markets, but the Fed’s Plans Should Come as No Surprise

While we may see further clarification from Federal Reserve Chair Janet Yellen or her colleagues in the coming days, her statement yesterday that there would likely be a six-month window between the end of the Fed’s Quantitative Easing program (QE) and the start of rate hikes was not all that surprising, according to Fran Rodilosso, fixed income portfolio manager for Market Vectors ETFs.

“That statement has had, and will likely continue to have, an impact on bond investors in the short-term,” said Rodilosso. “But the notion of mid-2015 rate hikes should not come as much of a surprise. It should also be taken, even if the statement is not clarified, as an estimate at best as nothing in this situation is pre-ordained. The Fed will obviously remain very data dependent.”

Rodilosso added that if the yield curve adjusts now, as it began to do in 2013 before the “tapering” process actually commenced, the market will have already done some of the Fed’s work. “The chances of a rate shock would be much reduced in that case,” he said.

“Ideally, we will see economic data to support a ‘tapping on the breaks’ by the Fed in middle of 2015,” continued Rodilosso. “Any actions sooner might indicate that the Fed has fallen behind the curve and the market is at risk for something much more severe than a normalization of rates. Anything later would mean that growth and employment are not yet firing on all cylinders. Equity and credit markets would likely struggle under the latter scenario.”

Mr. Rodilosso has over 20 years of experience trading and managing risk in fixed income investment strategies, including more than 17 years covering emerging markets. Among the Market Vectors ETFs under his watch are Investment Grade Floating Rate ETF (NYSE Arca: FLTR®), Treasury-Hedged High Yield Bond ETF (NYSE Arca: THHYTM), Emerging Markets Aggregate Bond ETF (NYSE Arca: EMAGTM), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM®), Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC®), Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL®), International High Yield Bond ETF (NYSE Arca: IHY®), and Renminbi Bond ETF (NYSE Arca: CHLC®). As of February 28, 2014 the total assets for these ETFs amounted to approximately $1.4 billion.

Please note that the information herein represents the opinion of the portfolio manager and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. ©2014 Van Eck Global.

About Market Vectors ETFs

Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totaled $34.0 billion in assets under management, making it the eighth largest ETP family in the U.S. as of February 28, 2014.

Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes.

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. The Funds' underlying securities may be subject to call risk, which may result in the Funds having to reinvest the proceeds at lower interest rates, resulting in a decline in the Funds' income.

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