Adjusting Portfolios For Recovery
By: Cameron Diehl, CFP®
Friends – As markets are constantly evolving, the Investment Strategy Committee at Raymond James regularly issues new research and advice for our clients based on input from the top experts across all areas of the firm.
Recently, this team issued updates to the firm’s Strategic Asset Allocation models, which guide how we develop and implement our clients’ investment portfolios, to reflect their belief that the current investment environment favors equities and that bonds’ upside potential is likely to be limited. In issuing these updates, Raymond James’ Investment Strategy Committee noted:
- “We believe the investment environment favors equity investments in large part due to the continued support by major central banks around the world including the Federal Reserve, Bank of Japan, ECB, Bank of China, and the Bank of England. This support comes in the form of accommodative monetary policy. As economies continue to recover from the COVID pandemic and the ‘reopening trade’ takes hold we expect to see a more broad-based recovery in the equity markets. The large amounts of fiscal stimulus that continue to be injected into the system are also supportive of the equity markets.
- The Federal Reserve has stated that it will likely maintain short-term interest rates at current (low) levels and continue with expansionary monetary support through at least 2023. Since interest rates are unlikely to rise, bond risk is low; however, returns are also limited. Bonds will continue to play a major role in portfolios as a hedge to equity risk.
- In accord with our outlook we have added equity, primarily U.S. large cap to all the portfolios while decreasing the exposure to high-quality bonds. We have also decreased the exposure to non-traditional bonds (multi-sector fixed income) and increased the exposure to high-yield bonds, which should provide a better risk-return opportunity.”
If you have any questions about how we are specifically implementing these recommendations for our clients or would like to discuss Raymond James’ asset allocation guidance and how it could support your personal planning, please don’t hesitate to reach out.
