I had a few ideas for this week’s blog post but had a difficult time deciding which one to develop into a full-fledged post. Instead, I am posting here my random thoughts about the current capital market and economic environment, so you know what I am thinking about. I will pick one out of this list and fully develop it for Next Week’s Blog Post. Stay tuned!
With interest rates and credit spreads now just off their historic lows combined with an accommodative Fed, unless you need to fund an absolute cash flow guarantee in the future or need to reduce risk in your portfolio, mathematically, now is a bad time to buy bonds.
Equities, on the other hand, now seem to be a good place to allocate capital since the economy seems primed to continue its strong recovery from the global pandemic. This view is mostly supported by Q1 earnings results so far, where 81% of S&P 500 companies have reported positive earnings surprises through last week, the second highest percentage of positive surprises since FactSet started tracking the data in 2008.
Though minimizing investment fees is a good way to help investors achieve their investment goals, getting the right asset allocation is even more important.
Inflationary fears are heating up due to the huge amount of fiscal stimulus with huge budget deficits. Traditional inflation hedges like stocks and real estate should be part of everyone’s portfolio to hedge that risk. The consensus view on commodities and inflation bonds (TIPs) is less clear based on current market levels.
What is ESG (environmental, social and governance) investing? Should I get involved?
Do you have enough income and assets to retire? I am ready to do an update on the generic analysis posted last year, Is there a “Number” for You? where I calculated the probability of success of a hypothetical investor. If you want me to customize it specifically to you with our MoneyGuidePro analytical software, let me know and I would be happy to help!