When Do I Allocate More to Stocks? - Adviser Investments

When Do I Allocate More to Stocks?

August 3, 2020

What role do bonds play in a portfolio, and how do we approach a decision on shifting portfolios more heavily into stocks? Vice President Steve Johnson discussed our allocation process in our recent quarterly webinar*—Take Your Pick: Recession or Recovery?

Please enjoy the excerpt below and click here for the full webinar replay to hear more.   

* * * * *

Steve Johnson: I’ve learned more about the virus and medical data than I ever have in my 51 years over the last couple of months.

We are now looking at the four different metrics. And as we look at those metrics, we’re going to continue to focus on earnings. For example, right now—this week and next week—we’re in the midst of earnings season and we’re going to see how companies’ stocks react to their earnings releases. And so, as we know, expectations are pretty low.

We’re also looking at interest rates. If I had told you that the 10-year bond would close under 0.6%, I don’t think I would have had many takers several years ago.

So, as we look at that and the economic data, what we’re going to see right now is a mixed picture—the earnings picture is quite blurry. And we don’t really know what valuations we should put on the market at this point and what the P-E [price-to-earnings ratio] should be. However, stocks are still attractive, especially as we compare them to bonds.

Technology has dominated the market to such an extent due to those names that you’re all familiar with, the so-called “stay at home” stocks. They have had such outrageous performance that it has created a huge divergence in the market among other sectors, such as industrials and materials. And our managers right now, I know, are thinking about those opportunities to take advantage of stocks and areas that haven’t participated over the shorter period and the longer period.

As we get through the earnings piece, and of course if we see more encouraging news regarding the virus, we will reassess, as we always do, our positioning. We’ve been a little bit underweight stocks. I mean, I think it’s been the right position, because the data is so mixed, but understanding that we’re looking at that on a daily basis and we know that there are areas of the market that will create great opportunity [down the road].

* * * * *

Click here for a replay of Take Your Pick: Recession or Recovery? Please contact us at (800) 492-6868 to learn more about comprehensive wealth management solutions.


*Webinar recorded after the market closed on Wednesday, July 22, 2020.

Disclaimer: This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. All investments and strategies are subject to risk of loss; principal is not insured; past performance is no guarantee of future performance. Our statements and opinions are subject to change at any time, without notice and should be considered only as part of a diversified portfolio. Mutual funds and exchange-traded funds mentioned herein are not necessarily held in client portfolios. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed.

You may request a free copy of the firm’s Form ADV Part 2A, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged.

Past performance is not an indication of future returns. We do not provide legal or tax advice, nor sell insurance products. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Always consult an attorney or tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

© 2020 Adviser Investments, LLC. All Rights Reserved.

Adviser Investments' logo is a registered trademark of Adviser Investments, LLC.