Themes and observations from U.S. Portfolio Insights
In our Portfolio Insights Analytics team’s review of thousands of client portfolios, we are seeing a lean toward equities with higher growth potential, such as U.S. large growth and small and mid cap equities (EXHIBIT 1).
Within fixed income, the team has observed lower allocations to high yield bonds alongside larger allocations to higher quality bond categories, such as Intermediate Core, Core-Plus and Short-Term Bonds (Exhibit 1).
As investors construct portfolios against the backdrop of the sharpest, and potentially briefest, recession on record, they appear to be mindfully balancing risk-taking in one area with a more cautious approach in others.
AMID SEISMIC CHANGES IN PORTFOLIOS, INVESTORS STRIVE TO BALANCE RISK AND REWARD
The second quarter saw swift corrective reactions after Q1’s pandemic-triggered sell-off. Unprecedented stimulus around the globe—paired with slowing COVID-19 infections—helped the MSCI All Country World Index (ACWI) finish just 8.3% shy of its highs, its best quarter since 2009, after a historic Q1 sell-off that cost the index a third of its value.
Asset class trends (most utilized Morningstar categories)
EXHIBIT 1: HIGH, LOW AND AVERAGE ALLOCATIONS OBSERVED BY OUR TEAM (TRAILING 12 MOS.)
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The Portfolio Insights team analyzes thousands of portfolios and conducts thousands of one-on-one consultative calls with investors annually. Our team of 18 specialists is focused exclusively on helping investors with asset allocation decisions, investment selection and portfolio implementation. Through its interactions, the team gleans valuable insights and meets every quarter to review and assess these themes and trends, and their potential portfolio implications.
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