Ask the Rational Investor: Repositioning Your Portfolio into Market Strength
Most major stock market indices have recouped about two-thirds of their decline over the past several months. Reexamining the allocation of cash, fixed income, and stocks in your portfolio now that prices have recovered could be a good idea.
A few examples of things to consider might include:
- Do I have enough cash for the next 6 months of anticipated withdrawals?
- If your fixed income didn’t provide enough downside protection as interest rates increased, consider selling fixed income positions that have an average maturity of greater than 3 years and purchasing a shorter-term option.
- Look for concentrated position risk in your portfolio. Do you have 5 or 10% of your equities in one company?
Unlike past economic recoveries, the Federal Reserve is unlikely to lower interest rates to support financial markets due to lingering inflation. Investors should anticipate further interest rate increases and a volatile stock market.
Europe’s economic and monetary policy has become more challenging over the last several months, increasing the likelihood of very slow economic growth or a recession in Europe. Weak European growth will impact US companies as about 14% of the S&P 500 sales are directly tied to Europe.
The house of cards in Chinese real estate development is splintering throughout the entire Chinese economic and political system. At this point, it is unclear what if any broader implications for global economic growth might be, but investors should watch further developments closely.
Beese Fulmer Private Wealth Management was founded in 1980 and is one of Stark County’s oldest and largest investment management firms. The company serves high-net-worth individuals, families, and non-profits, and has been ranked as one of the largest money managers in Northeast Ohio.