Right time to rebalance portfolios

In the recent SMSTrustee News article focussing the state of markets and how many investors are not positioned for the potential of more losses, Talaria Co-CIO Chad Padowitz said: “We cannot emphasise enough that if the market gives investors another opportunity to rebalance, they should take it.”

“For example, investors in US equities, the most important global region, are very pessimistic but have done little about it. Shares are at lofty percentages of household wealth. In fact, on some measures S&P 500 valuations have rarely been higher in its long and storied history,” Chad noted.

He also acknowledged corporate profitability is unlikely to drive long-term returns due to their current uncertainty.

“Whether it is signalled by yield curve inversion, falling leading indicators, spiking unit labour costs or rising interest rates and taxation, near record margins are almost certain to come under pressure,” Chad said.

“The current state of equity market valuations should be encouraging individuals to make changes to their portfolio holdings, but are not actually having this effect.”

Read the full article here.