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Here’s how portfolio allocations have shifted
“We’re attempting to address both inflation and recession concerns,” said certified financial planner John Middleton, owner of Brighton Financial Planning in Flemington, New Jersey.
For stock allocations, he likes companies paying a high dividend, and value stocks, which typically trade for less than the asset is worth, with a tilt to infrastructure, energy, real estate and consumer staples.
And the fixed-income side of the portfolio may include assets with a so-called shorter to intermediate duration, factoring in the bond’s coupon, time to maturity and yield paid through the term.
We’re attempting to address both inflation and recession concerns.
John Middleton
Owner of Brighton Financial Planning
“We’re slightly higher allocated to corporate bonds than we are to Treasury bonds,” said Middleton, explaining that he’s comfortable taking on greater credit risk to earn more income.
However, allocations may shift based on key data releases later this week.
Middleton may adjust portfolios based on readings on the personal consumption expenditures price index, the Fed’s preferred inflation gauge, and the U.S. gross domestic product, which may hit a second negative quarter of growth — one definition of a recession.
Investors need to ‘stay the course,’ experts say
Long-term investors shouldn’t respond to rising interest rates with “swift short-term moves,” said Jon Ulin, a CFP and CEO of Ulin & Co. Wealth Management in Boca Raton, Florida.
Whether you’re deferring funds into your 401(k) plan or investing cash as a retiree, now isn’t the time to be “cute or fancy,” he said. By staying invested when the market is down, you may benefit from market upswings and future recovery, he said.
While it’s been a rough year for bond prices, which typically move down as interest rates go up, these assets are now offering the negative stock market correlation that investors expect, Ulin said.
“Diversification can now help investors sleep a little bit better,” he said. “You need to stay the course, calm down and take a deep breath.”
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