Current market conditions show a lower global long-term growth and lower fixed income yields relative to historical norms. This should translate into a more challenging investment environment. Stocks will have a relatively high valuation and bonds will offer limited income.
How should investors allocate their portfolios in this kind of environment?
Our opinion is that investors shouldn’t let the current conditions dictate their long-term portfolio strategies. The long-term return expectations are muted but positive and patience with a broadly diversified portfolio is likely to be rewarded over the next decade with fair inflation-adjusted returns.
Looking at the price chart of S&P500 index the medium and short term signal on the market is a buy but the long term signal on the market is still a sell. This information is displayed on the left side bar under “Market Trend”.
The market is going sideways for the last few weeks in a very tight range. It does look extended so this would not be a time to add more money to stocks. Wait for the short term signal to give a buying opportunity (become less extended) before buying.
As always since the long term signal is a sell, be prudent with 70% invested and 30% in cash.
To see which sectors are working in the current environment click on the tab “Sector ETF Analysis Weekly 8/26/2016” at the top.
Also see the chart under “Growth vs Value Chart Updated Weekly 8/26/16” tab to see if you need to change your allocation between growth and value.
These two items are updated every week, so do check them every week even if there is no new blog.
