For global investors, time off from markets can be a good opportunity to take stock of one’s portfolio. (ddp)


Much of that rally has been built on US-China trade talk progress, dovish central banks, and a recovery in economic activity data.


By the same stroke, any challenge to this cheery narrative – from an incrementally less supportive policy to weaker data or earnings – could undermine sentiment. In essence, investors must prepare for near-term risks, and at the same time stay positioned for long-term growth.


To manage this, we suggest investors adopt a Plan. Protect. Grow. framework for their portfolio:
  • Plan: Instead of short-term benchmarks, we recommend investors focus on their needs and then organize their financial life accordingly, across three strategies: Liquidity—to help provide cash flow for short-term expenses, Longevity—for needs over the course of a life-time, and Legacy—for needs that go beyond their own, such as philanthropy. This can help investors avoid inefficient portfolio allocations, or costly drawdowns during periods of market distress.

  • Protect: As a starting point, investors should ensure the portfolio is well-diversified, with global assets and a balance of stocks and bonds. Current low volatility conditions offer relatively inexpensive hedging opportunities. We think investors should monitor their credit investments to manage unnecessary risks. And we like systematic asset allocation strategies as another way to control portfolio risks.

  • Grow: With interest rates likely to remain lower for longer, we recommend income strategies to improve compounded returns. We are screening for equity laggards – stocks which sold off last year but haven’t fully recovered – which may play catch up in the months ahead. And investors can sidestep short-term concerns through enduring, secular trends such as sustainable investing and long-term themes like genetic therapy and fintech.

So we maintain a moderately risk-on stance and recommend investors review their portfolios with an eye on risk scenarios on the horizon. For more region-specific ideas and context, please read our report, Be prepared: Plan, protect, and grow.


Main contributors - Jon Gordon, Sagar Khandelwal, Vincent Heaney, Christopher Swann


Content is a product of the Chief Investment Office (CIO).


Original report - Time off? Time to reflect. , 22 April 2019.