A collection of insights our Portfolio Solutions team gathered from working with thousands of advisors on close to ten thousand investment models in the past twelve months.
As the New Year approaches, it’s a healthy exercise to evaluate the year that’s ending and look ahead to the next one. Here we offer a collection of insights our BlackRock Portfolio Solutions team has gathered from working with thousands of advisors on close to ten thousand investment models in the past twelve months. We hope you find the look back and the look ahead helpful.
2 things we learned in 2018
1. Corrections still happen
Entering 2018, it was easy to forget that markets actually can and do go down. The S&P 500 had held below its long-term average volatility for the previous six years, and hadn’t dealt investors a 10% decline in almost two years. In 2018, we saw two such corrections – the first beginning in late January and the second in early October. The first was hard to react to. It lasted only nine days, and quickly reversed as the market reached new highs in the subsequent months. Advisor models weren’t defensively postured entering the year, and it turns out they didn’t need to be for that first correction.
The second correction was more significant–not in magnitude but in the way it eroded confidence. As the year ends, we notice that, compared to earlier in the year, advisors are more concerned about global trade issues and less certain about where we are in the market cycle.
In the past, our stress test analysis of all ten thousand models suggested advisors had client portfolios well-positioned for further economic growth (the right call), but not well-positioned for a recession. If the collective views of the advisors we work with are shifting, we should expect advisor models to demonstrate that change. While we’ve learned that corrections do still happen, we haven’t seen much evidence that advisors are doing much about them….yet.