Meanwhile, U.S. equity markets were relatively calm during what was another low-volume August week. Value stocks outperformed growth shares slightly, boosted by better-than-expected earnings from the consumer staples sector and by rising commodity prices.
In the fixed-income market, U.S. Treasury bonds were essentially flat as “dovish” minutes from the Fed’s latest meeting allayed investors’ fears of a surprise interest rate hike in September. Corporate bonds continued to offer relatively attractive yields and prospects, and we continue to emphasize our exposure to corporate over Treasuries.
PROTECT: Risk Assist
From a volatility perspective, global stocks continued to maintain the calm they have demonstrated throughout August. That said, certain options positions that have helped keep volatility low expired this past Friday (8/19). With this lid on volatility now lifted, it is possible that the markets will start to experience more typical levels of volatility going forward.
SPEND: Real Spend
After spiking post-Brexit, global volatility quickly subsided and now hovers around 6.6%—approximately one-third its one-year average over the long term. This calm environment has helped to benefit stock markets, which in turn has provided a tailwind for Real Spend portfolios that maintain relatively large equity weightings versus more traditional retirement income portfolios that tend to overweight bonds.
For example, typical target date funds for investors entering retirement generally have about 75% of the equity exposure as a moderate Real Spend portfolio. In particular, Real Spend portfolios with global exposure have benefited from strong quarter-to-date performance by international stock markets.
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