There were several housing-related economic data releases last week. The reports showed that the pace of new home construction continued to improve in March, driven by long builder backlogs and a lack of existing homes for sale. This will be another busy week of updates, with reports that will touch on business spending, consumer confidence, first-quarter GDP growth, and personal income and spending in March.
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Alternative Investments and the Well-Balanced Portfolio
Earlier this week, my colleague Rob Swanke wrote about the relevance of the 60/40 portfolio in light of the current market environment. He asked whether this investment model, which seeks to balance the growth potential of equities with the volatility mitigation potential of fixed income, should be abandoned. Spoiler alert! Rob suggests we need to look forward, not backward, when making portfolio decisions, even though market conditions have changed. While short-term adjustments may help boost performance, the 60/40 portfolio can still be an attractive choice for the moderately aggressive investor.
Global Inflation Outlook: Are Lower Numbers on the Horizon?
Inflation has grabbed headlines for the better part of a year now, as the Covid-19 response led to increased demand and supply constraints. That said, short-term inflation expectations have changed dramatically in recent months. In April 2021, inflation expectations for 2022 remained relatively subdued, with the International Monetary Fund (IMF) calling for 1.6 percent consumer price inflation in 2021 and 1.7 percent in 2022 for advanced economies. In October 2021, these numbers had moved up to 2.8 percent and 2.3 percent, respectively. Since then, inflation in the U.S., euro area, and other advanced economies has continued to pick up, with the IMF’s most recent report from this month showing inflation for advanced economies at 5.7 percent in 2022 and 2.5 percent in 2023.
What has led to changes in this global inflation outlook? And what conditions are contributing to the IMF’s lowered inflation expectations going into 2023 and beyond?
Bringing the 60/40 Portfolio Back to Life
Over the past few years, many people have been looking for alternatives to the 60/40 portfolio (a portfolio allocation of 60 percent equities/40 percent fixed income)—and for good reason. The Fed’s massive intervention to lower interest rates made the 40 percent allocation to fixed income in the 60/40 portfolio much less attractive. With inflation reaching levels we haven’t seen in decades and the Fed set to push interest rates higher, people have been wondering whether fixed income still provides the protection of principal that many investors are looking for. The Bloomberg US Aggregate Bond Index’s worst quarter in more than two decades has certainly increased this concern. This pain, however, has put fixed income in a much healthier position going forward with higher starting yields able to cushion investors from further declines in price.
What’s Ahead for Fixed Income Investors?
So far this year, we’ve seen a challenging start for fixed income investors. Rising interest rates caused prices for previously issued bonds to fall throughout the first quarter and into April, which led to declines for most fixed income sectors. As a result, many investors have been questioning what caused the selloff and what lies ahead. But, despite the rough start, there are reasons for optimism. Let’s look at what triggered the selloffs and why the rest of the year may offer opportunities for fixed income investors.
Monday Update: Retail Sales and Consumer Sentiment Improve
Last week saw the release of a number of important economic updates. March’s inflation reports drew much of the attention, along with news on retail sales and consumer sentiment. The reports showed consumer and producer inflation picking up in March, in part due to rising energy costs. Nonetheless, retail sales growth remained solid during the month, and consumer sentiment improved to start April. This week will be busy once again, with a focus on the housing market update.
Director of Operations
Ashley has been working in the customer service field since she started her first job at age 16. For the past ten years she worked in an office setting handling accounts payable and receivable as well as some receptionist work. She is very excited to learn more about the investment field.
Alec joined Riverstone after starting out his post college career on the operations side of an international logistics company working as an account executive. Graduating with a BA in Economics from the University of Illinois at Urbana-Champaign, he quickly developed a strong interest in the financial world. A lifetime resident of the Chicagoland area, Alec is an avid fan of his hometown sports teams. He is also an enthusiast of outdoor activities like fishing, camping, and hiking whenever possible.
Carol has a wide variety of experiences and has worked mainly with not-for-profit organizations. She spent 20 years in fundraising and 15 years teaching in the Illinois school system while she raised her younger children. Carol lives in Sugar Grove with her husband, Ron, and their Golden Retriever, Charley. She has four children and two grandchildren. When she’s not working, Carol enjoys spending time with friends and family, running, fishing, bible study, and watching her grandchildren play sports.
Wealth Advisor
Wealth Advisor / Registered Principal
Wealth Advisor
Wealth Advisor / Registered Principal
Wealth Advisor
Wealth Advisor Assistant
Registered Relationship Assistant