Ivy ProShares S&P 500 Bond Index Fund

Ivy ProShares S&P 500 Bond Index Fund

Market Sector Update

  • As expected, the Federal Reserve raised its benchmark rate by 0.25 percentage-points in December, lifting its target to a range of 1.25 percent to 1.5 percent.
  • Treasury yields continued to flatten throughout much of the quarter. The two-year section of the curve rose 40 basis points while the 30-year yield tightened 12 basis points.
  • U.S. gross domestic product posted a final measure of 3.2 percent during the quarter, down slightly from initial estimates. Consumer confidence hit a 17-year high in the quarter, fueled by low unemployment, record-high equity markets, and pending fiscal reform.
  • Demand for high-quality corporate bonds remained strong, as investment-grade bonds outperformed speculativegrade credits for the quarter.

Portfolio Strategy

  • The fund had a positive return for the quarter, benefitting from further flattening of the yield curve. As such, longermaturity corporate bonds outperformed shorter-dated bonds for the quarter.
  • Every sector contributed to the positive performance for the quarter. Top performers included energy, utilities and materials. Health care, information technology, and consumer staples were the bottom performers.
  • Returns were relatively consistent across credit tiers for the quarter; “BBB“ rated credits modestly outperformed higher quality bonds.
  • U.S. corporate issuance remained robust in the fourth quarter as 2017 set another record, marking six consecutive years of record bond issuance.


  • Markets will focus on the impact of the tax overhaul with specific interest in how corporate savings will be spent (i.e. buybacks, dividends, capex, wages, price investments, etc.).
  • Shorter-term rates will continue to be driven higher by the Federal Reserve (Fed), as they forecast another two to four rate hikes in 2018. The Fed also plans to continue the process of normalizing their $4.5 trillion balance sheet, which could have broad implications for the bond markets.
  • After a year of muted volatility within nearly all asset classes, bond market participants should have expectations for a return closer to historical norms, given the potential headwinds of rising rates, widening credit spreads, and inflationary pressures.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through Dec. 31, 2017, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. While the Fund attempts to track the performance of its stated index, there is no guarantee or assurance that the methodology used to create the index will result in the Fund achieving high, or even positive, returns. The Index may underperform, and the Fund could lose value, while other indices or measures of market performance increase in value. Fixed-income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in below investment grade securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. As of June 30, 2017, the index was concentrated in the financial industry group; therefore, the Fund is subject to the same risks faced by companies in the financials industry to the same extent as the index is so concentrated. Such risks include extensive government regulation, fluctuation of profitability, and credit losses resulting from financial difficulties of borrowers. A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index, and there is no guarantee that the Fund will achieve a high degree of correlation. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in the Fund's prospectus. Not all funds or fund classes may be offered at all broker/dealers.