Goldman Sachs lowered their most recent median projection for equities, putting the year-end target for the S&P 500 at 4,900. It's clear the markets hadn’t accurately priced in the Ukraine risk which could be worse in Goldman’s eyes than the 2014 Crimea annexation. Additionally, Goldman warned that if inflation continues to be worse than their expectations and faster rate hikes are needed the S&P 500 could decline by up to 12% to 3,900 by end of 2022, and if a recession occurs when the trough is lower yet. The best plays are in industrials and consumer discretionary, but still, energy leads the way.

Finsum: In lockstep with Goldman, a recession is a worst-case scenario. The TIPs market says inflation expectations are still moderate, so they shouldn’t overact to inflation.

Many investors have become accustomed to the rising equity prices that have been pumped up by an ultra-low rate environment and are overexposed to too much risk, at least that's the opinion of 4/5ths of investment professionals surveyed by Natixis Investment managers. Over 3/4rs of professionals surveyed said that inflation and interest rates were the biggest risks to portfolios moving forward. The way out of that risk exposure is to have more active management which can thrive when the risks are apparent. The other solution is model portfolios which have been built to target specific risks like inflation or interest rate risk. Finally, advisors are being begged to add crypto to portfolios in a high weight, and are unsure of how this fits into portfolios.

Finsum: Regular volatility or supply-side shocks are almost impossible to predict, but when the risks are very apparent investors should take the necessary precautions.

Many investors are fretting over the rising bond yields which are sending their prices tumbling, but this could just be the tip of the iceberg. The aggregate bond index AGG has already fallen 3.9% and that's with the critical 10-year T-bill only rising to a 2% yield. If the 10-year hikes all the way up to its high of 3.25% in 2018 that could be a disaster. With inflation at a 40-year high that's a real possibility and any yield you are getting is all eaten away at. However, if inflation is temporary (caused by supply chains) or Fed pulls breaks fast enough then yields might be maxing out, and bond prices could turn around.

Finsum: Inflation expectations are remarkably low which means that investors are convinced either the Fed will credibly bring inflation down or as supply chains loosen that will bring inflation down. Markets are saying that bond risk is priced in.

Markets are flummoxed as to the variety of risks right now, and it is just unclear how aggressively if at all the Fed and Biden are going to respond to the economic threats. There are two ways to capitalize on the current dip that is hitting your portfolio. The first is tax-loss harvesting; these risks are ones that are more than a month long which could give you the opportunity to repurchase the drops you made in the upcoming months. For those investors who feel adequately equipped in the tax-loss harvesting space, rebalancing is the main tool. That is if your portfolio has lost 10% value inequities with the drops, then up your share to meet the ratios you were at pre-dip. Once stocks have rebounded you can capitalize and re-tool in the opposite direction to maintain the portfolio balance you want in order to serve your risk preferences.

Finsum: Don’t sit during the volatility, but don’t sell off unless you are going to capitalize on the tax efficiency in your portfolio.

The Biden administration’s SEC has lept from one sub-financial industry to the next whether it's crypto or ESG, but now they are gonna take a closer look at private equity and other ‘alternatives’ like hedge funds. The process is mainly would limit what retirees and savers have opportunities in private equity and hedge funds through their plans and limit them to accredited investors. Alternatives have taken off in the last few years and the SEC is looking to increase transparency and possibly limit access. They are cautioning other companies from putting PE in retirement portfolios.

Finsum: This limited access could take the many savers and retirees out of the huge gains in PE over traditional equity markets, and might only hurt the general public.