Chief investment officers and investment committees in the wealth management space stress the importance of setting up client portfolios for the long-term and avoid overreacting to short-term market disruptions. In addition, aside from a brief, sharp sell-off in response to the tariffs imposed on Liberation Day last spring, markets themselves have become less responsive to policy and geopolitical shocks, including sending gold and silver to new all-time highs.
However, recent events have prompted a new bout of volatility. The revelations of an investigation into Federal Reserve Chairman Jerome Powell renewed concerns about long-term Fed independence. Regime change in Venezuela, unrest in Iran and uncertainty about Russia’s war on Ukraine have been shocks on the geopolitical front. And recent proclamations from President Donald Trump about capping credit card interest rates and limiting institutional ownership of homes have investment implications.
With all of that afoot, Wealth Management reached out to wealth management firms to gauge CIO and investment committee reactions and whether they had any plans to adjust asset allocation recommendations as a result.
While views vary, some common themes stand out.
From a macro perspective, investment strategists expect continued economic growth and believe the Fed will retain its independence and continue its path of gradual easing. They expect strong earnings growth, driven by strong fundamentals. However, there are some concerns about elevated valuations for the equities market in addition to the overall market concentration with a handful of megafirms dominating indexes.
Firms are doubling down on the importance of diversification across all asset classes to manage volatility and concentration risks. Some are pointing to private markets to help with diversification and seek out alpha. They recommend broad exposures to corporate bonds, municipal bonds, mortgages and asset-backed securities within fixed-income allocation.
In addition, investment pros remain bullish on artificial intelligence and technology, precious metals and other commodities and international exposures to serve as a currency hedge and access to diversification and growth opportunities.
The following slideshow includes the views of more than a dozen experts on the current state of markets.
