At some point in 2021, the pandemic may subside. As the global population is less affected by Covid-19, people’s expectations for economic recovery are increasing.
Looking forward to the post-pandemic future, financial advisors are taking steps to position their clients for a better tomorrow. Portfolio management requires constant review, but plans to make a comeback in the labor market and change consumer behavior present unique challenges.
As the U.S. stock market is close to historical highs, hopes of recovery are mixed with concerns about excessively high stock prices on the cliff. To some extent, relative to earnings, recent stock prices are higher than at any time since the US stock market crash in 1
“If customers put new funds into the market, due to the existence of the market today, we will do more dollar cost averaging,” said Jennifer Weber, a certified financial planner at Lake Success in New York. “It makes customers worry, especially if they Worried about how high the market is now.”
For long-term investors, even if there is a short-term decline, stocks may still be a source of income. Therefore, consultants are trying to find the best position in the bubble market.
Weber said that after years of growth in growth stocks, valuations are more attractive to value stocks. As a result, her team is gradually reducing customer investment in her so-called “blue chip growth” products (such as familiar names in the technology field) in favor of value stocks. Weber said: “Growth risks and volatility have reached a peak.”
In response to volatility, consultants often seek bonds to stabilize their investment portfolios. However, using bonds to capitalize on the post-pandemic recovery also brings risks. Jon Henderson, a certified financial planner in Walnut Creek, California, expressed concern about the surge in global debt levels driven by massive government spending.
He said: “If we see a reversal of the decline in interest rates over the past two decades, this may cause a rude awakening.” “Many investors have never experienced an environment of rising interest rates. People may not be prepared for this.”
To mitigate this risk for customers, Henderson is considering reducing the average maturity of fixed-income bonds in the portfolio. For some retirees or retirees who prioritize a stable source of income, this may be a challenge.
He said: “One way to gradually shorten the maturity of a tiered portfolio is to suspend investment instead of replacing maturing bonds with longer maturity bonds that are usually purchased.” The sensitivity to changes is low.
The Fed said it intends to maintain its benchmark lending rate at close to zero before the end of 2023. But some advisers warned investors not to think that interest rates will remain low during this period.
RI Wakefield adviser Brian Murphy said: “In fact, the Fed may fall behind the curve, catch up and be forced to increase interest rates, especially if the economy is overheating.”
He added that soaring base metal prices “may herald higher inflation”, as well as sharp increases in commodity prices and even Bitcoin.
There is an urgent need to profit from the post-pandemic recovery, and prosperous investors may take unnecessary risks. However, in this case, the basic principles of maintaining the Rainy Day Cash Fund are more important than ever.
Murphy said: “Don’t forget your six-month emergency fund.” He said that although cash earned can almost enable investors to chase higher yields, he warned that this risk may exceed the return. The rate of return is slightly higher.
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