There are 3 pertinent portfolio construction topics as we head into the fall:
- How do we position portfolios for structurally higher inflation in the years to come? In 1970s/1980s, inflation stayed high for 5-10 years. As we like to say, once the genie comes out of the bottle, it’s hard to put it back in. Most 60/40 portfolios still have a lot of long duration & deflationary exposure and may not do well in an environment of higher inflation/higher rates.
- There is an insatiable demand for income globally. Right now, you can buy a 6-month treasury bond and collect 3%, or perhaps you might venture off in credit land and buy IG bonds to collect 4-5%. Is that 200bps differential enough if the economy goes into a recession (and those bonds potentially get marked down 10-15%)?
- The macro data continues to worsen. What happens if we go into an earnings recession? Many clients do not want to own liquid alternatives. How do we hedge portfolios?
The biggest debate going into the fall is whether or not we will see a V-shaped recovery.
If your portfolio is leaning hard on equities, growth/tech, HY credit, etc., you’re likely anticipating a V-shaped recovery.
We’re not ready to back up the truck, and hence our tag line is “it’s time to start to nibble on stocks and credit” (click here and here). But as always, we want to be diversified across our factor risks (quality, value, etc.) and own a healthy portion of liquid alternatives. These tenets are, after all, Astoria’s True North.
Investors tend to have a short-term memory; in our view, they have been accustomed to recent V-shaped recoveries: Fall 2018 and Covid 2020. Will we see a trifecta?
In our multi-asset portfolios, Astoria is still leaning on DGRW (quality exposure), PPI (inflation with a quality/value tilt), and BTAL (a liquid alternative), as well as SPIB (credit exposure).
Our strategies can be purchased on the following platforms: Folio, Vestmark, GeoWealth, Schwab, TD Ameritrade, Fidelity, Wells Fargo, and more. Please contact Greg Sanderson (click here) if you have any questions on how to access Astoria’s ETF portfolios.
Astoria Portfolio Advisors Disclosure: Please note that Astoria Portfolio Advisors serves as a subadvisor to the AXS Astoria Inflation Sensitive ETF. The information contained in this email does not imply a recommendation for PPI. Readers should consult their financial advisor to determine if PPI is a suitable investment for their portfolio. For more information on PPI, please click here. As of this publication Astoria Portfolio Advisors held positions in DGRW, PPI, BTAL, and SPIB on behalf of its clients. Past performance is not indicative of future performance. Any third-party websites provided on www.astoriaadvisors.com are strictly for informational purposes and for convenience. These third-party websites are publicly available and do not belong to Astoria Portfolio Advisors LLC. We do not administer the content or control it. We cannot be held liable for the accuracy, time-sensitive nature, or viability of any information shown on these sites. The material in these links is not intended to be relied upon as a forecast or investment advice by Astoria Portfolio Advisors LLC and does not constitute a recommendation, offer, or solicitation for any security or investment strategy. The appearance of such third-party material on our website does not imply our endorsement of the third-party website. We are not responsible for your use of the linked site or its content. Once you leave Astoria Portfolio Advisors LLC’s website, you will be subject to the terms of use and privacy policies of the third-party website. Refer here for more details.
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