Not a Fan of Your Plan?

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Asset class returns vary widely over time, making allocation decisions difficult and market timing success unlikely. Equal-weighted global asset allocation returns (“Global AA”) are shown for illustration.

Markets have been volatile and investors are still jittery. Yes, interest rates have moved up, but the Federal Open Market Committee (FOMC) minutes released yesterday indicate that the Federal Reserve (Fed) has not really become significantly more hawkish. The economy is indeed booming. The latest Job Openings and Labor Turnover Survey (JOLTS) of job openings reported an all-time high record high 7.1 million available positions. Initial jobless claims remain near a 50 year low. Regional manufacturing indices like Philly Fed and Empire State indicate healthy growth in manufacturing. Retail sales are at all-time record highs due to a strong and confident consumer. Markets, on the other hand, have not had their best year. Investors are jockeying for position, rotating in and out of sectors, styles and asset classes. This can be frustrating – like picking the wrong line in the grocery store, then switching only to find you are behind someone with a fistful of coupons writing a check. Having a solid plan for times like these can help investors sleep better. Markets go up and down but over time they follow the fundamentals – company earnings. Global diversification can help smooth some of the bumps, but there will still be bumps. Chasing last quarter’s or last year’s best performers is often the worst plan. Often the top dog in one year is in the dog house the following year.

See the colorful patchwork quilt on page 85 of the Global Perspectives Book and don't forget to register for the GP Quarterly Market Outlook Webinar!

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