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Here’s how portfolio allocations have changed
“We’re trying to address both inflation and recession issues,” said certified financial planner John Middleton, owner of Brighton Financial Planning in Flemington, New Jersey.
For stock allocations, he likes high-dividend paying companies and value stocks, which typically trade below asset value, with a bias towards infrastructure, energy, oil and gas. real estate and consumer staples.
And the bond side of the portfolio can include assets with a so-called shorter to intermediate duration, taking into account the bond’s coupon, term to maturity, and yield paid throughout the duration.
“We’re slightly more allocated to corporate bonds than Treasuries,” Middleton said, explaining that he’s comfortable taking on greater credit risk to earn more income.
However, allocations may change based on key data releases later this week.
Middleton may adjust portfolios based on readings of the Personal Consumption Expenditures Price Index, the Fed’s favorite inflation gauge, and U.S. gross domestic product, which could hit a negative second quarter of growth — a definition of a recession.
Investors must ‘stay the course’, experts say
Long-term investors shouldn’t react to rising interest rates with “quick, short-term moves,” said Jon Ulin, CFP and CEO of Ulin & Co. Wealth Management in Boca Raton, Florida.
Whether you’re rolling over funds in your 401(k) plan or investing money as a retiree, now is not the time to be “cute or fancy,” he said. By staying invested when the market is down, you can benefit from market upside and future recovery, he said.
Although it’s been a tough year for bond prices, which typically fall as interest rates rise, these assets now offer the negative market correlation investors expect, Ulin said.
“Diversification can now help investors sleep a little better,” he said. “You have to stay the course, calm down and breathe deeply.”