The Investors Dual Dilemma
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
Are you prepared for these historic challenges?
What are you doing differently?
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