“The economy’s held up reasonably well to this point because of the strong labor market, and consumers' fairly strong financial position,” says Eric Freedman, chief investment officer for U.S. Bank Asset Management. “On balance, we’re still optimistic about the consumer, particularly among middle- and upper-income consumers.”
Where to invest today
“Be prepared to take what the capital markets offer given the current environment’s realities,” says Freedman. He advises that long-term investors consider positioning their portfolios with an overweight position in equities relative to fixed income, and a neutral weight invested in real assets. Freedman adds, “It’s critical to have a financial plan that’s tied to the specific goals you hope to achieve.” With a plan in place, you can more readily identify investment strategies that align with your goals.
Notably, says Haworth, investors should consider global diversification. “Although it looks like the U.S. economy remains stronger than those of overseas markets, valuations of non-U.S. stocks are more attractive, so they offer a little more margin for error,” says Haworth. “Economic and earnings fundamentals continue to look good.”
Based on your goals, timeline and risk appetite, consider these additional portfolio strategies:
- Broad-based, global equity market exposure to capitalize on potential opportunities both domestically and overseas.
- For tax-aware investors, consider slightly longer-than-average durations in municipal bonds, including a modest allocation to high-yield municipal bonds.
- For non-taxable fixed income diversification, consider adding global positions and maintaining near-benchmark portfolio duration, and non-government agency issued mortgage-backed securities.
- For trust portfolios, investors may consider reinsurance to capture differentiated cash flow with low correlation to other portfolio factors such as market or economic trends.
Have questions about the economy, markets or your finances? Your U.S. Bank Wealth Management team is here to help.