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Election Results Indicate AGZD Could Be Advantageous

BY | ETF Database
3:55 am ET 11/12/26 | 3 VIEWS
Some races are still in the “too close to call” column, but the overall result of last week’s midterm elections is clear: It was a blue wave resulting in significant majorities for Democrats in both chambers of Congress. Predictably, investors wonder how the new era of Congress could affect the bond market and the Federal Reserve’s plans for interest rates come January.As Kevin Flanagan, head of investment strategy and fixed income at WisdomTree pointed out, the midterm results, while decisive, aren’t expected to alter the trajectory of 10-year Treasury yields. Flanagan expected yields on the benchmark U.S. government bond to remain in a range of 4.50% to 5.25%, indicating that, following the midterms, ETFs such as the WisdomTree Interest Rate Hedged U.S. Aggregate Bond Fund (AGZD C) remain pertinent. The rate-hedged AGZD is doing its job in 2026 and doing it well. The fund is up 4% while the largest traditional ETF tracking the Bloomberg U.S. Aggregate Bond Index carries a small loss. AGZD’s strength is something to consider, beyond the context of the midterm results. Indeed, as Flanagan noted, the October jobs report and the latest reading of the Consumer Price Index (CPI) could pave the way for the Fed to raise rates again in December.Divided Government Could Boost AGZD AllureWhen 2027 arrives, so does a divided government. Democrats will control Congress, while President Trump will maintain veto power. Conventional wisdom indicates Democrats are likely to boost spending, particularly on the healthcare front. And it’s possible that Trump will play ball with those efforts, provided that cuts to defense spending aren’t steep. That is to say, a divided government could result in expansion of the very deficits that are pushing inflation higher. That potentially compels the Fed to be more hawkish than expected next year. If that scenario plays out, AGZD could shine among aggregate fixed income strategies. “Thus, the budget deficit could actually expand. And even if no deal occurs, the fiscal policy law of the land for the next two years, at a minimum, is already in place due to the passage of the One Big Beautiful Bill Act (OBBBA),” observed Flanagan. “The OBBBA could also marginally increase the nation’s red ink total over that time, and don’t forget that increased coupon auction sizes as a result are a matter of when and how, not if.” Put simply, AGZD is as alluring as ever. After all, while things changed at the ballot box, Congress’s perspective on spending hasn’t shifted. “The bottom-line message is that while the midterm election results have captured a great many headlines, the actual outcome from a fiscal policy perspective may not mean all that much for the direction of UST yields,” concluded Flanagan. “Against this backdrop, we continue to see the UST 10-year yield trading in a 4.50%–5.25% range.” For more news, information, and analysis, visit the Modern Alpha Content Hub.Disclosures This article was prepared as part of WisdomTree’s general paid sponsorship of VettaFi | ETF Trends. This specific content within and any opinions expressed therein belong solely to VettaFi and do not reflect the opinion or analysis of WisdomTree, its employees, or its affiliates. Content published on VettaFi | ETF Trends is provided for educational purposes only and should not be considered investment or tax advice. For investment or tax advice, please consult a financial professional. WisdomTree is an independent company, unaffiliated with VettaFi | ETF Trends. WisdomTree has not been involved with the preparation of the content supplied by VettaFi | ETF Trends. It does not guarantee, or assume any responsibility for its content.

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