2020 05 Gyrations Cover Capture

It is well recognised that traditional diversification approaches are not effective in preserving capital in ‘late cycle’ market conditions.  In recent financial crises the value of stocks and bonds have moved together – as a consequence of historically low zero bound interest rates from record global indebtedness.

Instead, an approach that has been well recognised to work for all market conditions is to construct a portfolio with diversified non-correlated assets. 

The rebound in stock markets now provides an opportunity to re-balance your portfolio to include defensive ‘non correlated’ assets which will benefit from any major market corrections.

Our approach does not predict market movements. In portfolio construction one of the scenarios to consider is the consequences to your portfolio if the market was to repeat the  previous peak to trough falls.  For instance, a 50% fall would see the SP500 at 1693,  a reduction of 42.2% from current levels.

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