The poor performance for both equities and fixed income should not be undervalued. There was some protection with shorter duration fixed income and credit, but the YTD declines in the AGG benchmark is just under 10% while the SPY index is down close to 14%. Any portfolio with more than 40% stocks will be down double digits. The situation is even worse if the investors were tiled to growth, small caps, or longer duration.
Higher inflation, a hawkish Fed tilt that still seems behind the curve, economic data that suggests a slowdown in growth, and no direction with the Ukraine War is leading to a pessimistic environment. This was only further reinforced with earnings that overwhelmed many investors. Asset allocation trend models suggest that getting defensive may be the best solution to the current market environment.
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