/Investing advice, how to invest as all-weather portfolio falls: BofA – Business Insider
Investing advice, how to invest as all-weather portfolio falls: BofA - Business Insider

Investing advice, how to invest as all-weather portfolio falls: BofA – Business Insider


All-weather portfolios with equal 25% allocations to stocks, bonds, gold, and cash are having a historic run.
Over the last three months, these so-called permanent portfolios are up 18%, trouncing the 7% average, according to a July 23 note from Bank of America’s Chief Investment Strategist Michael Hartnett.
This is largely because of the Federal Reserve’s supportive policies in the wake of the coronavirus crisis, which have been beneficial across asset classes.
“Everyone’s a winner: [the] Fed has made bulls in every asset class a winner…gold, bonds, credit, stocks, real estate [are] all up big since March lows,” Hartnett said in the note.
More specifically, Hartnett said, the Fed’s stimulus has created two forces pushing markets higher: repression, with low interest rates and easy financial conditions, and debasement, or the lowering of the dollar’s value amid rising debt and government spending.
But, according to Hartnett, the party will soon be over.
Although repression has benefitted the market, Hartnett warns that debasement will lead to inflation. He also said that financial conditions are unlikely to get any better in July and August as policy stimulus peaks. Further, he warns of a “summer dip” of the S&P 500 to 3,050, which would amount to a decline of about 5%.
To prepare for this, he recommends a strategy of “global offence” and “American defence,” with US equity prices soaring relative to those in Europe by more than two standard deviations outside of the norm.



Bank of America

3 trades to make
Play this three ways, Hartnett said.
First, though commodities. Investors wishing to gain broader exposure to commodities might consider the  iShares S&P GSCI Commodity-Indexed Trust (GSG).
Second, through high-yield bonds. For diversified exposure to the sector, investors might look at the iShares US & Intl High Yield Corp Bd ETF (GHYG) and the Invesco Bulletshares 2022 High Yield Corporate Bond Etf (BSJM).
And third, by using any decline in US stocks as an opportunity to add to global stocks. A couple of ETFs offering broad international exposure include Vanguard Total World Stock Index Fund Etf Shares (VT) and the iShares Core MSCI EAFE ETF (IEFA).
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