In the first quarter of 2023, we reviewed over 2,000 professionally managed investment portfolios through our proprietary portfolio construction capabilities. Our analysis uncovers key themes playing out within each asset class that we believe will continue to be top of mind in 2023 and potentially beyond.

We are seeing the highest level of ETF usage in two years. The average portfolio includes 26% ETFs—a 5% and 8% increase from 2022 and 2021, respectively. As ETFs gain steam, the binary lines are blurred, with 38% of advisors relying on more than straight index products. They are predominantly strategic beta products (15%) and active ETFs (5%) versus straight index (6%), signaling a growing middle ground between active and passive as advisors explore a variety of wrappers for investment decisions.

The financial markets have been challenging as both stocks and bonds have struggled against the backdrop of 40-year high inflation. We may have entered a higher inflation regime where additional asset classes beyond stocks and bonds are needed to build a more diversified portfolio. Fidelity can help you navigate these challenges to position your clients' portfolios for years and decades to come.

Diversification does not ensure a profit or guarantee against a loss.

Past performance is no guarantee of future results.

ETFs are subject to market fluctuation, the risks of their underlying investments, management fees, and other expenses.

Stock markets, especially non-U.S. markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. The securities of smaller, less well-known companies can be more volatile than those of larger companies.

Although bonds generally present less short-term risk and volatility than stocks, bonds do contain interest rate risk (as interest rates rise, bond prices usually fall, and vice versa) and the risk of default, or the risk that an issuer will be unable to make income or principal payments.

Additionally, bonds and short-term investments entail greater inflation risk—or the risk that the return of an investment will not keep up with increases in the prices of goods and services—than stocks. Increases in real interest rates can cause the price of inflation-protected debt securities to decrease.

Alternative investments are investment products other than the traditional investments of stocks, bond, mutual funds, or ETFs. Examples of alternative investments are limited partnerships, limited liability companies, hedge funds, private equity, private debt, commodities, real estate, and promissory notes. Some of the risks associated with alternative investments are: Alternative investments maybe relatively illiquid. It may be difficult to determine the current market value of the asset. There may be limited historical risk and return data. A high degree of investment analysis maybe required before buying. Costs of purchase and sale may be relatively high.