It’s Late In The Market Cycle. Do You Know Where Your Portfolio Is?

In our most recent version of our Global Market Outlook, our strategist team points out again just how late we are in our current market cycle. U.S. equity markets, for example, have had steady growth since they bottomed out during the global financial crisis and look expensive by most metrics. And when it’s this late in the cycle, the next turn of the screw could be a major correction.

Savvy investors need to know how much they stand to lose in an adverse market and be ready to react. But acting appropriately requires a deep and detailed view of current exposures within a portfolio as well as an understanding of how those exposures may respond under stress. If you’re not sure where you are, how do you know if your next move will add value or cause harm? How can you calibrate positions without understanding the risk/return trade-offs they represent? This level of clarity—of truly knowing what you own—is not a nice-to-have. It’s foundational.

How street-level is your knowledge?

How deep does your view inside your portfolio need to go? Think about it this way. Say you’re taking your daughter to her soccer game. The clock is ticking and you’re driving to a field that you’ve never been to before. Even with the best map available, having the address for the field is not much good if you don’t have a clear idea where you are now. Every navigational app worth its salt tells you three things: where you are now, the destination and the best route between the two.

The same holds true with investing, with a vengeance. Knowing where a portfolio is now is essential and far from straightforward.Without that understanding, intentional portfolio management is impossible and unintended risks can creep into your portfolio. Grasping and managing positioning when using multiple mutual funds or sub-advisors compounds the difficulty of this problem and also compounds the importance of finding a solution.

A total-portfolio view