Broker Check
2022 Asset Allocation Woes

2022 Asset Allocation Woes

December 12, 2022

2022 has certainly been a challenging investment environment, which has called into question many traditional approaches: index investing, balanced portfolios and passive management being among them.  What concerns us most about the markets today include:

  • A downturn in S&P 500 earnings
  • The potential for a Fed policy error
  • A general tendency to think about turns in the economy and stock prices in V Shaped terms

However, there has been one additional concern that we have never experienced to this degree: a positive correlation between between stocks and bonds.

Over the past twenty years, we've grown accustomed to a negative correlation between these two asset classes.  But in fact, for the first time ever in 2022, both stocks and bonds have been negative for three consecutive quarters, as shown in the chart below:

Source:Strategas, Data as of 9/30/2022

Thus begs the question: is it time for a different approach.

Our approach is aligned with what every investor probably wants - the potential for growth and income while defending against their most feared risks.  

We rely on a systematic investment approach that adheres to timeless principles:

  • Diversification reduces portfolio risk
  • Markets tend to rise over time
  • Risks are more predictable and controllable than returns
  • Multi-asset portfolios earn positive returns from various asset classes
  • Smart portfolio construction and trading reduce exposure to taxable gains
  • The best method of compounding capital is to avoid large losses

We serve clients seeking risk managed, multi-asset, all weather solutions to their investment challenges.

We believe today's environment requires different thinking when balancing risk and return.