Here’s how advisors are shifting clients’ portfolios as the Federal Reserve again hikes rates by 75 basis points

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Here’s how portfolio allocations changed

“We’re trying both to address inflation and recession concerns,” John Middleton, a certified financial planner, stated. He owns Brighton Financial Planning in Flemington. 

He prefers stocks that pay a high yield dividend and value stocks. Value stocks are less expensive than the asset and tend to be more exposed to infrastructure, energy and real estate.

Fixed income assets can include assets with a shorter to intermediate term, taking into account the bond’s coupon and maturity time, as well as the yield paid throughout the term.

We are trying to address both inflation concerns and recession concerns.

John Middleton

Brighton Financial Planning owner

Middleton explained that corporate bonds are slightly more allocated than Treasury bonds. This is because he is comfortable taking on more credit risk to earn more income.

However, allocations could shift depending on key data releases later in the week.

Middleton may adjust portfolios based on readings on the personal consumption expenditures price index, the Fed’s preferred inflation gauge, and the U.S. gross domestic product, which may hit a second negative quarter of growth — one definition of a recession.

Experts advise investors to “stay the course”

Long-term investors shouldn’t respond to rising interest rates with “swift short-term moves,” said Jon Ulin, a CFP and CEO of Ulin & Co. Wealth Management in Boca Raton, Florida.

He said that now is not the time to be “cute and fancy”, whether you are investing cash in retirement or deferring funds to your 401(k). He suggested that staying invested when the market is falling can help you benefit from future recovery and market upswings. 

While it’s been a rough year for bond prices, which typically move down as interest rates go up, these assets are now offering the negative stock market correlation that investors expect, Ulin said.  

He said that diversification could now help investors to sleep better. “Keep your cool, take a deep breath, and keep going.

Source: CNBC

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