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Market volatility trap? This investment strategy may hurt investors

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Income-focused investing often leaves too much on the table, says Kathmere CIO
Income-focused investing often leaves too much on the table, says Kathmere CIO

The market volatility may be leading retail investors astray.

According to Kathmere Capital Management’s Nick Ryder, they shouldn’t use the current backdrop as an excuse to dive into defensive trades — including dividend-paying stocks and bonds.

“Oftentimes, we just see too often people taking an income-focused approach, and it leaves a lot on the table,” the firm’s chief investment officer told CNBC’s “ETF Edge” this week. “We generally just advise for all of our clients to take a total return-oriented approach … that’s going to apply across stocks, bonds and everything in between within a portfolio.”

Ryder, whose firm has $3.5 billion in assets under management, warns against so-called “yield-chasing.”

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“Within fixed income, it could be yield-chasing in terms of moving further out interest rate risk, taking greater amounts of duration and portfolio, [and] moving from investment grade to high-yield bonds —which have dramatically different risk and return expectations,” he added.

Ryder contends income shouldn’t be the foundation of long-term portfolios. He indicates investors are better served starting with goals and risk tolerance, then adding income, because pullbacks are part of long-term investing. An income-first approach, he cautions, can quietly push portfolios into unintended bets.

He’s also optimistic about the macro backdrop.

“Overall, the economy has been pretty darn resilient,” added Ryder. “You’ve seen corporate profitability be very resilient.”

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That total-return approach is also why Amplify ETFs’ Christian Magoon is urging investors not to let the distribution number drive the decisions. 

“We think being smart about yield means balancing attractive yield with upside or long-term capital appreciation … not just going for a maximum possible yield,” the firm’s CEO said in the same interview. “We think that’s a yield trap.”

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Crypto World

US President Trump Raises Global Tariff Rate to 15%, Crypto Doesn’t Budge

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US Government, United States, Donald Trump

US President Donald Trump is now using alternative legal routes to levy tariffs, but critics say his authority to impose them is still limited.

United States President Donald Trump announced on Saturday that he is raising the 10% global tariff rate announced on Friday to 15%, which will take effect immediately. 

Trump reiterated his criticism of the Supreme Court’s decision to strike down his authority to levy tariffs under the International Emergency Economic Powers Act (IEEPA). In a Saturday Truth Social post, he said:

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“As President of the United States of America, I will be, effective immediately, raising the 10% worldwide tariff on countries, many of which have been ‘ripping’ the US off for decades, without retribution, until I came along, to the fully allowed, and legally tested, 15% level.”

On Friday, Trump announced a 10% global tariff rate to be added on top of already existing tariffs that remained valid after the court ruling, under alternative legal statutes outlined in the Trade Expansion Act of 1962 and the Trade Act of 1974. 

US Government, United States, Donald Trump
Source: Donald Trump

However, pro-crypto attorney Adam Cochran said the scope of these laws also limits Trump’s authority to levy broad tariffs indefinitely.

“The law he is using only allows this to be on countries we have a deficit with, for a set period of 150 days, and at a capped percentage,” he said

Each new tariff announcement from Trump caused turmoil in the crypto and stock markets, with severe downturns that negatively impacted asset prices and fueled macroeconomic uncertainty among investors.  

Related: US lawmakers critical of Trump tariffs, say it will derail the economy

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Crypto markets held firm in the wake of the latest tariff announcements

The crypto market, which usually experiences heavy sell-offs in response to tariff announcements, held firm in the wake of the latest tariff headlines.

US Government, United States, Donald Trump
Bitcoin’s price barely reacted to the Trump tariff announcements on Friday and Saturday. Source: TradingView

The price of Bitcoin (BTC) held steady at the $68,000 level, and Ether (ETH) also remained firm, showing little to no change since Friday when the new tariffs were announced.

The Total3 indicator, which tracks the entire market capitalization of the crypto sector, excluding BTC and ETH, fell by less than 1% on Saturday and remains at about $713 billion at the time of this writing.

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