With an ageing bull market, rates at unusually low levels for this stage of the cycle, and rising geopolitical uncertainty, investors couldn’t be blamed for wanting to cash in their chips and run. But all these factors were true two years ago too, and the ASX 300 Accumulation Index (which includes dividends) has gained nearly 24% since then. The fact is that there will always be uncertainties in the market and reasons to worry, but without any insight as to the timing of a crash or recession, investors must position for a range of possible outcomes.
With so much noise recently on the topics of trade wars and bond yields, I decided to reach out to three leading asset allocation specialists to get their take on how they’re investing for the current conditions. Responses come from Tracey McNaughton, Head of Asset Allocation at Wilsons Advisory; Andrew McAuley, Chief Investment Officer of Credit Suisse Private Bank Australia; and Rob Holder, Head of Asset Allocation at Crestone Wealth Management.
Here, they share how they've adjusted their standard strategic asset allocation to account for current conditions.
The wisdom of age
Tracey McNaughton, Wilsons Advisory
The US equity bull market is now ten years of age. With age comes wisdom. Unfortunately, age also brings risk and in market years, a decade is considered old age. We have adjusted our asset allocation to reflect this late stage of the investment cycle in four key ways:
Increased diversity in the portfolio
Events and how the market and policy makers will respond can become more binary in the later stages of the cycle. Under these circumstances, it pays for investors to be as diversified as possible. We have recently increased our allocation to Australian bonds, unlisted infrastructure and private debt.