Jeff Chang, Managing Director at CBOE Vest , gives his thoughts on the current market environment and discusses strategies advisors can use moving towards a changing investing world.
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Related: Remodeling Portfolios to Shift Growth to Income
What are your thoughts about the current market environment?
Interesting times; uncharted territory Central bank actions last 10 years – unprecedented No more cushion by central bank actions moving forward Long-held assumptions can break down Asset allocation tricky Equity-bond not the same
What are some strategies you see advisors gravitating towards in this environment?
Volatility is back; Investors questioning whether the 10-year bull market is slowing and are concerned about impact of potential Fed rate hikes on portfolios Advisors recognize need for new sleeve New sleeve: Low vol equity, low risk equity, hedge equity. Control downside risk without allocating to fixed income S&P 500 Buffer Protect strategy; we have products
Why protect the first 10%?
Typically, you want to buy protection you are actually going to use By protecting the first 10% within a year, you are protecting the most likely losses Buying protection past 10% is similar to a high deductible insurance policy. You don’t use the benefits often.
How do you see these strategies used in portfolios?
Advisors’ client base closer to retirement, natural migration from equities to fixed income rate hikes potentially adding more risk Buffer protect strategy reduce the risk through cushion on the downside Goal to deliver equity upside participation, beat inflation, reduced volatility [Help investors STAY invested
