The Investors Dual Dilemma

Mark Sherwin NYSE Floor
Mark Sherwin of Floor or New York Stock Exchange (NYSE)

Investors are facing a portfolio dilemma on two fronts.

The State of Fixed Income Markets

• Going forward bonds may not earn the returns they have over last 30+ years.
• Current low yields punish savers, forcing them to stretch for income and risk principal.

The State of Equity Markets

• Most investors cannot afford another large drawdown and long recovery.
• Meanwhile slow domestic and global growth pressure may be with us for a long time.

It’s a Rock and a Hard Place Scenario

When interest rates rise, bond values will be eroded.

Investors need to maintain equity exposure to grow wealth, but most investors cannot afford a large drawdown. Meanwhile, fixed income assets may not be able to serve their portfolio protection role.

Did You Know?

A 1.00% rise in interest rates could result in a drop of 9.89% in the value of long-term bonds.*

Since 1929, the S&P 500 data shows that, on average, bear markets:

• Occur every 3.8 years
• Erase over 35% of market value
• Take 3.3 years to recover**

* Source: Morningstar Direct. Effective duration as of 12.31.17

** Source: Bank of America Merrill Lynch, Global Research, Bloomberg, Swan Global Investments: Returns based on S&P 500 from 1929 through December 31, 2017; Zephyr StyleADVISOR

Navigating the Dual Dilemma

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