New Regime, New Portfolio Approach

Thoughtful commentary from our partners at BlackRock:

Rethinking portfolios

The joint stock-bond rally this year has put renewed focus on portfolio construction approaches. We think a new macro regime needs a new approach.

Market backdrop

U.S. stocks rose last week but lost steam on Friday on the market partly pricing out potential rate cuts. We don’t see cuts this year as core inflation stays sticky.

Week ahead

U.S. earnings results pick up this week and are overall expected to slump the most in three years. We don’t think that reflects the coming damage yet.

Stocks and bonds have both rallied this year. Some see this as reason to return to traditional portfolio approaches like 60% stocks and 40% bonds. Those used to work when both assets trended up and bonds offset equity slides. We think a focus on any one asset allocation mix misses the point: A regime of higher volatility with sticky inflation needs a new approach to building tactical and strategic portfolios. We see the appeal of income, get more granular with views and are more nimble.

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