If your investment portfolio feels derailed this year, you are not alone. Few investments are holding up well. For 2022 year-to-date, stocks are in bear market territory and bonds are close. Even the historically safer 60/40 stock/bond portfolio is close to bear market territory.
In an environment set up to be a lost decade for many traditional asset classes, a potentially compelling option is moving from a 60/40 to a 50/30/20 portfolio allocation model to integrate a fund like the Catalyst/Millburn Hedge Strategy Fund (MBXIX), which has generated positive returns in both bull and bear markets.
As we enter the second half of the year, many questions remain regarding the trajectory of financial markets and the economy. Our stance on stagflation (or "recession-inflation") remains steadfast. Drawing parallels to the mid-1970s, structurally, we are in a stagflation environment amid 41-year high supply-side inflation (driven by soaring oil prices and food prices), slowing GDP, and the eventual unravelment of the tight labor market.
For months, investors have been scaling what feels like an endless wall of worry. Each concern that gets resolved seems to spawn new uncertainties, yet the market has continued its relentless climb higher.
We’ve lived this movie before. Last August, AAII bullish sentiment struck a 52-week high right before the Fed launched its September rate cutting cycle.
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