There are 3 pertinent portfolio construction topics as we head into the fall:
- How do we position portfolios for structurally higher inflation in the years to come? In 1970s/1980s, inflation stayed high for 5-10 years. As we like to say, once the genie comes out of the bottle, it’s hard to put it back in. Most 60/40 portfolios still have a lot of long duration & deflationary exposure and may not do well in an environment of higher inflation/higher rates.
- There is an insatiable demand for income globally. Right now, you can buy a 6-month treasury bond and collect 3%, or perhaps you might venture off in credit land and buy IG bonds to collect 4-5%. Is that 200bps differential enough if the economy goes into a recession (and those bonds potentially get marked down 10-15%)?
- The macro data continues to worsen. What happens if we go into an earnings recession? Many clients do not want to own liquid alternatives. How do we hedge portfolios?
The biggest debate going into the fall is whether or not we will see a V-shaped recovery.
If your portfolio is leaning hard on equities, growth/tech, HY credit, etc., you’re likely anticipating a V-shaped recovery.
We’re not ready to back up the truck, and hence our tag line is “it’s time to start to nibble on stocks and credit” (click here and here). But as always, we want to be diversified across our factor risks (quality, value, etc.) and own a healthy portion of liquid alternatives. These tenets are, after all, Astoria’s True North.
Investors tend to have a short-term memory; in our view, they have been accustomed to recent V-shaped recoveries: Fall 2018 and Covid 2020. Will we see a trifecta?
In our multi-asset portfolios, Astoria is still leaning on DGRW (quality exposure), PPI (inflation with a quality/value tilt), and BTAL (a liquid alternative), as well as SPIB (credit exposure).
Our strategies can be purchased on the following platforms: Folio, Vestmark, GeoWealth, Schwab, TD Ameritrade, Fidelity, Wells Fargo, and more. Please contact Greg Sanderson (click here) if you have any questions on how to access Astoria’s ETF portfolios.
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Photo Source: Astoria Portfolio Advisors