If advisors were hoping that 2026’s macroeconomic uncertainty would go away soon, recent headlines have likely dashed those aspirations.
Worries over the direction of inflation have resurfaced yet again, after the January PPI report came in far higher than many were expecting it to. Of course, the PPI report came after a more modest CPI report for January. However, the monthslong government shutdown last year raised concerns over the potential accuracy of the CPI report’s data.
Meanwhile, the once seemingly indomitable AI sector is now showing signs of potential weakness. To start, chipmaking giant Nvidia’s latest outlook did not assuage investor concerns that AI spending can be sustainable in the long run. Meanwhile, concerns over how AI could upend a number of different job sectors were reignited, due to both a viral Substack post from Citrini Research and innovative updates to Anthropic’s Claude Cowork tool, which some critics worry could be implemented to replace human job positions.
These headlines all came before war escalated in the Middle East this weekend. With chaos mounting in the region, global macroeconomic uncertainty is on the rise. That only adds to the worries started with both AI and the PPI.
With uncertainty on the rise, advisors are likely going to be searching for tools to offer more control, security, and predictable outcomes. Fortunately, the flexibility of the ETF wrapper has allowed advisors to achieve more downside control than ever before.
Rising to the Top With Bond Ladders
There are plenty of different ways for advisors to look to manage that potential portfolio risk. To start, they could look at products like bond ladder ETFs. True to their name, bond ladder ETFs offer long-term income by investing in a laddered collection of bonds.
Usually, the ‘rungs’ of the ladder are separated by years across the fund’s predetermined maturity range. As such, the rungs will traditionally be filled with bonds that hit maturity during a particular time period, such as a one-year or two-year period. When the bond matures, that principal usually gets reinvested into the ladder.
Taking on bonds through a laddered lens can offer plenty of portfolio perks. To start, the laddered structure itself is built to offer a more predictable stream of income, which can be crucial in moments of uncertainty. Furthermore, the format can help mitigate reinvestment and timing risk, meaning advisors get to spend less time worrying about bond management and more time enjoying lower-risk income.
Opting for Defense With Structured Protection
Bond ladder ETFs are not the only products that can provide a more controlled portfolio outcome. For instance, Calamos Investments offers its line of Structured Protection ETFs, such as the Calamos S&P 500 Structured Alt Protection ETF – March (CPSR). These funds use options strategies to provide a blend of upside equity exposure and downside security.
In CPSR’s case, the fund’s options allow it to provide complete downside security across a one-year outcome period, after accounting for fees and expenses. Considering how macroeconomic uncertainty is rising, not falling, funds that use options to provide downside risk management could prove to be highly useful.
Granted, CPSR’s upside exposure to the equity market does come with a cap on its potential returns. However, the cap may prove to be a worthwhile trade-off to achieve stability and a more controlled outcome, especially as the market enters an environment of heightened macroeconomic chaos.
All in all, if last week’s headlines can teach us any lessons, it’s that the market can truly shift at a moment’s notice. What was formerly a safe haven asset may lose its luster, all because of an unfavorable earnings call, new piece of economic data, or even heightened geopolitical conflict. As such, advisors looking for routes to navigate through the chaos can leverage the ETF wrapper to tap into strategies that help generate more controlled strategies and outcomes.
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Originally published on Advisor Perspectives
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