Article 5 of 5: 1st Quarter Commentary
Investors should be assessing diversification opportunities.
As the pool of attractive assets shrinks, so do choices capable of reducing portfolio risk. Bonds lose value as rates rise, so they’re not a suitable alternative. We have written about the valuation differential between domestic and non-US assets for a few years now. Foreign markets are poised to garner greater attention, given significant relative discounts and continued earnings growth. Ultimately this divergence of the past decade will reverse – providing we see continued strength in the global economy.
We believe commercial real estate remains a top choice for stability and current income. This sector is highly attractive due to demographic demand and limited supply. Valuations and significant cash flows that benefit from inflation should remain intact. Even as supply catches up and rents stabilize over the next few years, real estate remains a top choice to complement equity market risks.
With (commission-free) access to several types of direct real estate vehicles, we shifted some stock exposure to these more stable assets, seeking modest appreciation and substantial dividends. Most have income or asset requirements.
Last Fall, we shifted excess gains down the risk spectrum, lengthening the timeframes insulating growth investments from disruptive market events. We anticipate further risk reduction moves into the Fall of ’22 as markets feel the bite of higher interest rates. Each of our clients has a unique ratio across our time-horizon strategies. As the year progresses, we will continue seeking timely moves in all our strategies.
If you’re interested in our layered risk approach that brings clients greater peace, reach out to us about your situation.