“Growth still makes sense,” said Azzarello. “However, if we want a little bit more of a tilt in the portfolio given where we are in the cycle, we would say, ‘Add a bit more value.'”
“Emerging markets have been kind of immune to Fed rate increases–that’s been good,” Azzarello added. “However, the dollar strengthening has been really hard on emerging markets year-to-date. We don’t expect that to persist and we do think there’s value there.”
Get and Stay Invested Even as Rates Rise
Last month, the Federal Reserve raised the federal funds rate by 25 basis points–the third rate hike this year on the tailwinds of strong economic data. The latest sell-offs in October have been blamed on rising rates, causing investors to fret over whether they should stay on the sidelines.
While investors typically shift from U.S. equities to the safer confines of government debt, rising rates could also be worrying investors in conjunction with inflation that could tamp down returns from fixed-income assets. However, Azzarello views this as a blessing in disguise.
“Rates going up is a good thing,” Azzarello said. “I know it doesn’t feel that way when fixed-income returns are going negative. However, at some point, we are going to benefit from some more income in the fixed-income market and it’s something that just has to happen.”
While the temptation to stay in cash is alluring with factors at play affecting both stocks and bonds, Azzarello recommends that investors tell their clients to stay invested.
“They key thing would be we want to always continually get and stay invested,” said Azzarello. “And there’s ways to do that which make sense after a 10-year bull (market) so this doesn’t have to be cash on the sidelines or all into the market.”
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