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The global economy and financial markets continue to be challenged by a multitude of crosscurrents. Persistently high inflation exacerbated by the energy price shocks from the Russia-Ukraine conflict, spurred the Federal Reserve to hike interest rates more aggressively than anticipated. High inflation and tighter financial conditions weighed on consumer and business confidence, and growth fears helped send stock prices into bear market territory. The question is how much of this is priced in? In fact, unemployment continues to be low at 3.6%, with an excess demand for labor. Given consumer spending constitutes 70% of the GDP, retail sales rose 1% reflecting a market that has perhaps priced in a shallow recession that may or may not come to be.
To monitor key trends in advisors' strategic allocations and rebalances, we have reviewed over 3,200 professionally managed investment portfolios in Q2 2022 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 2022 and potentially beyond:
- Fixed Income
After a strong 2021 for absolute and relative returns, performance in 2022 has been challenged 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 besides stocks and bonds are needed to build a more diversified portfolio. Contact your Fidelity representative to find out how we can help you navigate these challenges to position your portfolios for years and decades to come.
Diversification does not ensure a profit or guarantee against a loss.
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Fidelity Portfolio Construction Solutions Team
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- Fixed Income