Natixis Global Asset Management believes in a consultative approach to portfolio construction and asset allocation. To that end, we work hard to maintain a comprehensive understanding of global market and performance trends. This information can help financial advisors and their clients prepare for a range of potential market conditions and allow them to remain focused on achieving long-term financial goals.
Understanding Global Performance
According to our analysis of model portfolios, U.S. model portfolios ended the year about where they started – generating an average loss of 0.9%.1 On the other hand, French portfolios experienced average gains of 7.6% due to their exposure to European equities. UK and Italian portfolios likewise benefited from exposure to strong-performing regional markets, with average gains of 5.3% and 5.2%, while Singapore and Spain had gains of 3.5% and 2.0%. However, U.S. portfolios with exposure to international equities faced headwinds, as the strong dollar offset the gains from abroad.
Preparing for Volatility
In January 2016, there were 18 trading days (or 68% of trading days) where the S&P 500® gained or lost more than 1% – compared to 15% of all trading days in 2014 and 28% of all trading days in 2015.2 Market volatility can cause some investors to make emotional decisions. However, while every investment involves some risk, volatility can also represent an opportunity for disciplined value investing and strategic acquisitions for active managers.
Moreover, our research of model portfolios suggests that advisors are growing more receptive to alternative investment strategies. Allocations in alternatives increased 6.6% in 2015, compared to 3.5% in 2013.3 It appears that investors and advisors are moving beyond the traditional portfolio 60/40 allocation and considering a wider variety of available investment strategies.
Rather than focus on active or passive management alone, advisors and their clients should also focus on the importance of diversifying their portfolios in the effort to better endure all potential market conditions. This begins with an understanding of how short-term market movements often vary greatly from longer term historical growth trends.
Performance indicators from 2015 and volatility in early 2016 exemplify why investors should avoid focusing on short-term results and instead concentrate on long-term goals and managing risk. Advisors and their clients need to be able to withstand any near-term market downturns and episodes of market volatility as they work to achieve their unique vision of long-term financial success.
1 According to the 2015 Natixis Portfolio Clarity Trends Report Press Release.
2 According to the 2015 Natixis Portfolio Clarity Trends Report, published February 2016 (pg 4)
3 According to the 2015 Natixis Portfolio Clarity Trends Report, published February 2016.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed above may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted.
Understanding current market conditions and what might be expected in the near term.
Moderate model portfolio performance in 2016 was a tale of two halves.
Discussing the causes and potential consequences of the UK’s "Leave" vote.