Investing Through Uncertainty

History proves that staying invested, even in times of significant uncertainty, generates the best long-term outcome for investors. To feel confident in sticking to that tried-and-true approach, we encourage you to consider a few portfolio tune-ups.

1. Lean into core bonds
Year-to-date performance has been painful, but there’s a much greater chance that rates will move lower, not higher. The recent rise in rates means that investment-grade corporate and/or municipal bonds now offer attractive absolute levels of yield and portfolio protection should a recession spark a further selloff in equities.

2. Prioritize quality in equities
This year’s equity declines have brought valuations lower making for a more compelling entry point. We advocate staying invested in stocks, but we believe it’s prudent to tilt the allocation toward higher-quality market segments. Healthcare, for example, has attractive defensive characteristics: It is the only S&P 500 sector to deliver consecutive annual earnings growth over the past 25 years.
You might also choose to participate in the stock market with protection. Elevated volatility creates attractive pricing for derivatives and structured notes that offer downside protection.

3. Beyond stocks and bonds
Acknowledging the risks that may lead to one of the less favorable scenarios we have described, you may consider other complements to the basic mix of stocks and bonds. Exposure to commodities, or companies involved in their supply chains, could prove beneficial. Alternative real asset exposure, such as diversified real estate or infrastructure, can offer portfolio diversification and act as a hedge against the potential for persistent inflation.

We advocate staying invested in stocks, but we believe it’s prudent to tilt the allocation toward higher-quality market segments.

Rick Barragan is the Managing Director, Los Angeles Market Manager, for J.P. Morgan Private Bank.
[email protected] | (310) 860-3658
privatebank.jpmorgan.com/los-angeles