Northern Trust’s Phillips On Asset Allocation In Uncertain Times

Daniel Phillips, Director of Asset Allocation Strategy, Northern Trust Asset Management, and Keith Black, Managing Director of RIA Channel discuss the macroeconomic outlook for 2023.

The current macroeconomic situation is one of great uncertainty, especially due to heightened geopolitical tensions.  Given this uncertainty, markets are likely to remain volatile and equity valuations may need to decline.  As such, investors may wish to emphasize higher quality, lower volatility investments.  Surprisingly, high yield bonds may fit this definition, as historically their return is comparable to equities but at a lower level of risk.   Investors may also wish to allocate to stocks that benefit from the proven excess returns earned from exposure to value, quality, low volatility, and small capitalization factors over a full market cycle.  While some investors may be tempted to increase cash holdings during times of rising yield, investors with a time horizon beyond five years can still benefit from exposure to equities. 


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