North American investors have been able to gorge on very accommodative monetary policy since the start of the COVID-19 pandemic. The vaccine rollout in late 2020 and early 2021 erected hopes that the pandemic would soon be in the rear-view mirror. While governments are still wrestling with COVID-19 cases, economies in the developed world have been able to return to a semblance of normalcy.
Loose monetary policy and radical spending to support those impacted by the pandemic has led, at least in part, to surging inflation in Canada and the United States. Central banks have been content to wait for much of 2021, but new reports suggest that their patience is wearing thin. Interest rate hikes appear certain to arrive from both the Bank of Canada (BoC) and the United States Federal Reserve in 2022.
Investors worried about a rate tightening cycle should look to the Purpose Floating Rate Income Fund ETF (TSX:FLOT). This exchange-traded fund (ETF) has an active strategy that is designed to preserve capital in a rising interest rate environment. In it, interest payments adjust to changes in reference rates. Shares of this ETF have climbed 3.3% in 2021 as of late afternoon trading on November 15.
Some of the top holdings in this ETF include senior bank loans, structured credit, short-duration bonds, and preferred shares. It has 30% of its holdings in the Financials space. This is an ETF well worth snatching up as central banks are almost sure to move ahead with interest rates hikes in 2022.
