What could go wrong?

Questions you can ask your UBS Financial Advisor:

  • If stocks have been doing so well, for so long, should I still invest in them?
  • What assets should I hold, if we may be closer to the end of the expansion?
  • Is it wise to invest in bonds at this stage of the economic cycle?
  • How can I protect my portfolio from a market downturn—and still pursue my long-term investment goals?

Since March 2009, U.S. equities have seen significant growth with major indexes hitting all-time highs in 2017 and the S&P 500 is up 260%. And while this has been a positive outcome for those fully invested during this time, it’s also created concerns about having too much equity exposure given the length of the market rally and its current valuations.

How should you position your portfolio to minimize the risk of potential downturns while at the same time remaining poised to capture growth? CIO Americas, Wealth Management (CIO-A WM) offers a breakdown of where we are in the current economic cycle and delivers portfolio recommendations in its new report: “A nine-year bull market: What could go wrong? (PDF, 315 KB)

While CIO-A WM doesn’t believe the bull market will end any time soon, it does believe that we’re closer to the end of the expansion than the beginning. Some insights that can help guide you as you think about your investments at this stage of the expansion include:

  • Equities generally provide high returns in the economic recovery and expansion stages—and lower, but still positive returns, in slowdowns
  • Bonds usually do best in recession and recovery stages when interest rates are falling and have yet to start rising, while returns are lower in an expansion and slowdown
  • It’s important to know which stage of the cycle the economy is in—and when it will transition to another—in order to make appropriate asset allocation decisions

CIO believes that, after nine years of a bull market, portfolios can easily be overexposed to equities relative to their long-term strategic allocation and notes that rebalancing back to one’s target allocation could potentially reduce the negative impact of a bear market. At the same time, CIO believes investors should be prepared to respond to opportunities that arise during market corrections. It maintains that, to successfully navigate this environment requires discipline, engagement and active monitoring of the economic cycle.

To that end, investors should ensure their portfolio is globally diversified, regularly rebalanced and is consistent with a goals-based long-term financial plan.

Is your portfolio prepared for the later stages of a bull market? Together we can find an answer. Connect with your UBS Financial Advisor or find one.

Disclosure