The first half of 2018 went well in terms of market performance and economic growth.
In fact, the second longest-running bull market in U.S. stock market history managed to weather a few bumps and bruises to climb even higher. That’s the good news.1
The bad news are the expected near-term headwinds that could change the tide of performance, such as:2
- Higher commodity costs
- Threat of trade wars
- Potential party leadership change in Congress
- Political uncertainty in Europe, the Middle East, Asia, and the U.S.
- Higher commodity costs
- Threat of trade wars
- Potential party leadership change in Congress
- Political uncertainty in Europe, the Middle East, Asia, and the U.S.
It’s a good time for investors to evaluate their portfolios to ensure they still align with asset allocation strategies. Is it possible your equity allocation is larger than originally intended? Is your portfolio tilted toward higher risk than your overall risk tolerance level? Are you closer to your financial goals than expected by this point?
Given the potential for market headwinds, you may want to address these questions with your financial advisor. If you’d like help assessing your current portfolio, please feel free to give us a call.
The idea of pivoting to a more conservative position may fly in the face of reason, particularly given the double-digit revenue growth companies have recently experienced, combined with favorable tax cuts from the new legislation. A Morgan Stanley analyst recommends exploring the fundamentals of specific holdings to better understand their resilience. To illustrate, an analysis of companies during the 2008 recession revealed that those boasting stronger margins significantly outperformed peers with manageable leverage both during the recession and after the market recovered.3
In the ETF market, managers expect increased volatility as well as a hike in interest rates once or twice by the year’s end. There’s a general sense that globally diversified portfolios may want to consider pivoting to more U.S.-based revenue sources as well as lower-volatility strategies and investments.4
Even as we consider a potential downturn, it’s still wise to pursue growth, pivoting toward companies that use innovation to create new revenue streams. A recent survey of 1,440 C-level executives across 11 industry sectors and 12 countries found that while only 6 percent of companies have successfully penetrated new market opportunities, those that did earned at least 75 percent of their current revenues from these previously unexplored markets. While this may sound like a reference to higher-risk start-ups, it’s worth considering well-established players who have adapted new business strategies to pair stability and growth opportunities within a portfolio.5
Innovative companies also may sustain growth through market declines by pivoting workforce needs toward artificial intelligence (AI) automated technology. Experts recommend employers assess workforce requirements in terms of tasks, not jobs. Automating some tasks can help elevate the intellectual capital needed for other tasks. This could empower workers to make more meaningful contributions to drive growth while reducing the cost of menial tasks.6
1 Bank of America U.S. Trust. June 19, 2018. “Mid-Year Outlook: Bright Spots, New Risks.” https://www.ustrust.com/articles/mid-year-outlook-bright-spots-new-risks.html. Accessed July 13, 2018.
2 Ibid.
3 Morgan Stanley. May 22, 2018. “The Financial Decision Maker’s Art of Learning to Pivot.” http://www.morganstanley.com/ideas/financial-decision-makers-learning-to-pivot?cid=ndbdmg-smsp-national-902. Accessed July 13, 2018.
4 Cinthia Murphy. ETF.com. July 13, 2018. “Mid-Year ETF Portfolio Positioning” http://www.etf.com/sections/features-and-news/mid-year-etf-portfolio-positioning?nopaging=1. Accessed July 13, 2018.
5 Business Wire. June 15, 2018. “Successful Companies Pivot to New Opportunities by Revitalizing – Not Neglecting – Their Core Businesses, Accenture Report Finds.” https://www.businesswire.com/news/home/20180615005048/en/Successful-Companies-Pivot-New-Opportunities-Revitalizing-–. Accessed July 12, 2018.
6 Business Insider. June 26, 2018. “CEOs Must Pivot their Workforces to Seize AI-driven Growth and Help Them Work with Intelligent Technologies, Accenture Report Finds.” http://markets.businessinsider.com/news/stocks/ceos-must-pivot-their-workforces-to-seize-ai-driven-growth-and-help-them-work-with-intelligent-technologies-accenture-report-finds-1027317128. Accessed July 13, 2018.
Content prepared by Kara Stefan Communications
The hypothetical example provided is for illustrative purposes only; it does not represent a real-life scenario, and should not be construed as advice designed to meet the particular needs of an individual’s situation. We are able to provide you with information but not guidance or advice related to Social Security benefits. Our firm is not affiliated with the U.S. government or any governmental agency. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA, or by any federal government agency. Annuities are designed for retirement or other long-term needs. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
1 Bank of America U.S. Trust. June 19, 2018. “Mid-Year Outlook: Bright Spots, New Risks.” https://www.ustrust.com/articles/mid-year-outlook-bright-spots-new-risks.html. Accessed July 13, 2018.
2 Ibid.
3 Morgan Stanley. May 22, 2018. “The Financial Decision Maker’s Art of Learning to Pivot.” http://www.morganstanley.com/ideas/financial-decision-makers-learning-to-pivot?cid=ndbdmg-smsp-national-902. Accessed July 13, 2018.
4 Cinthia Murphy. ETF.com. July 13, 2018. “Mid-Year ETF Portfolio Positioning” http://www.etf.com/sections/features-and-news/mid-year-etf-portfolio-positioning?nopaging=1. Accessed July 13, 2018.
5 Business Wire. June 15, 2018. “Successful Companies Pivot to New Opportunities by Revitalizing – Not Neglecting – Their Core Businesses, Accenture Report Finds.” https://www.businesswire.com/news/home/20180615005048/en/Successful-Companies-Pivot-New-Opportunities-Revitalizing-–. Accessed July 12, 2018.
6 Business Insider. June 26, 2018. “CEOs Must Pivot their Workforces to Seize AI-driven Growth and Help Them Work with Intelligent Technologies, Accenture Report Finds.” http://markets.businessinsider.com/news/stocks/ceos-must-pivot-their-workforces-to-seize-ai-driven-growth-and-help-them-work-with-intelligent-technologies-accenture-report-finds-1027317128. Accessed July 13, 2018.
Content prepared by Kara Stefan Communications
The hypothetical example provided is for illustrative purposes only; it does not represent a real-life scenario, and should not be construed as advice designed to meet the particular needs of an individual’s situation. We are able to provide you with information but not guidance or advice related to Social Security benefits. Our firm is not affiliated with the U.S. government or any governmental agency. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA, or by any federal government agency. Annuities are designed for retirement or other long-term needs. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
2 Ibid.
3 Morgan Stanley. May 22, 2018. “The Financial Decision Maker’s Art of Learning to Pivot.” http://www.morganstanley.com/ideas/financial-decision-makers-learning-to-pivot?cid=ndbdmg-smsp-national-902. Accessed July 13, 2018.
4 Cinthia Murphy. ETF.com. July 13, 2018. “Mid-Year ETF Portfolio Positioning” http://www.etf.com/sections/features-and-news/mid-year-etf-portfolio-positioning?nopaging=1. Accessed July 13, 2018.
5 Business Wire. June 15, 2018. “Successful Companies Pivot to New Opportunities by Revitalizing – Not Neglecting – Their Core Businesses, Accenture Report Finds.” https://www.businesswire.com/news/home/20180615005048/en/Successful-Companies-Pivot-New-Opportunities-Revitalizing-–. Accessed July 12, 2018.
6 Business Insider. June 26, 2018. “CEOs Must Pivot their Workforces to Seize AI-driven Growth and Help Them Work with Intelligent Technologies, Accenture Report Finds.” http://markets.businessinsider.com/news/stocks/ceos-must-pivot-their-workforces-to-seize-ai-driven-growth-and-help-them-work-with-intelligent-technologies-accenture-report-finds-1027317128. Accessed July 13, 2018.
Content prepared by Kara Stefan Communications
The hypothetical example provided is for illustrative purposes only; it does not represent a real-life scenario, and should not be construed as advice designed to meet the particular needs of an individual’s situation. We are able to provide you with information but not guidance or advice related to Social Security benefits. Our firm is not affiliated with the U.S. government or any governmental agency. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are insurance products that may be subject to fees, surrender charges and holding periods which vary by company. Annuities are not a deposit of nor are they insured by any bank, the FDIC, NCUA, or by any federal government agency. Annuities are designed for retirement or other long-term needs. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.
