Economy

While the stock market is starting to show signs of turning around volatility is still present. Adding to the complexities is the conflicting macro news that investors are getting. The most recent jobs report was strong despite signs growth is slowing, and the Fed is slamming on the breaks. For short-term investors and that nearer retirement, it might still be a bit before you jump back in. However, many on the street are telling young and long-term investors to get back in the market. Sectors like tech are turning around and acquisitions will be very fruitful for the long-run growth of the industry. Hedge funds are still running high on cash and in ultra-low exposures post-GFC, which could be a sign the end isn’t quite here yet.


Finsum: The next GDP release will be critical for the economy, if things are moderate and inflation isn’t extreme equities could rally. 

The Fed has entered a nearly 20-year unprecedented tightening cycle with the latest 75 bps hike, and that is more than beginning to shift bond markets. While existing bondholders might be upset as bonds prices and yields are inversely correlated and both tightening and inflation are inching yields up, income investors are rejoicing at the small dividends being paid out in fixed-income ETF funds. While the dividends in short-term treasury funds are by no means large it could be a sign of change. Experts are saying we could see mid-3%  in these cash-adjacent products by the end of 2022. With the Fed nowhere near close to taming inflation in many people's eyes, this could just be the start of meaningful dividend payments.

Model portfolios have gained a lot of traction in the last couple of years, and that’s bearing out in the market with both launches and inflows increasing over the last 3-5 years. However, what are the main advantages of model portfolios for investors and advisors? For investors, they are a series of complete packages that address specific needs simply often times based on preferences, lifestyle decisions, and demographics. They can also address specific problems such as the macro turmoil permeating markets currently. For investors, they offer additional benefits of freeing up time for clients and their personal needs. Studies have found that clients highly value the interpersonal communication that advisors bring, regardless of the age demographic. Models give advisors the flexibility with respect to time to understand their client’s desires and help them navigate financial decisions.


Finsum: Models have huge advantages in sectors because they can match preferences simply rather than combing through individual securities.

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