While there remains ongoing contention about the possibility of the U.S. entering a recession, several experts firmly believe that a downturn is indeed on the horizon. While some suggest that a potential downturn could emerge as early as next summer, others believe it will not transpire until the fall of 2024.
Thankfully, irrespective of the possibility or timing of a recession, there exist proactive measures that investors can presently adopt to guarantee the robust safeguarding of their wealth against any future uncertainties. Yahoo! Finance turned to Dick Pfister, CAIA, chief executive officer and founder of AlphaCore Wealth Advisory, to learn more. According to Pfister, building a diversified portfolio is crucial for any investor hoping to hedge against volatility – regardless of the state of the economy. However, in times of economic downturns, portfolio diversification becomes paramount.
“Portfolios should be broadly diversified to include stocks, bonds and alternative investments,” says Pfister. “This type of allocation can help protect the client if the stock market sells off or if we head into recession. On the other hand, having a certain amount of stocks in a portfolio can help a portfolio participate in the upside if a recession does not occur.”
Pfister tells the publication that the events that occurred in 2022, and, subsequently what is happening now, illustrates this philosophy in action. “The broad stock market indices were down nearly 20% or more in 2022, and bonds were down as well,” he explains. “Many alternative strategies like trend following, private credit, multi-strategy and some long/short equity managers posted positive returns in 2022. Thus, providing ‘protection’ in a down market.”