“The sun still came up this morning,” Steve Wruble quipped at the beginning of “Wruble on Little Change After Fed,” The Bloomberg Advantage Podcast, which aired December 17, 2015, discussing how investor portfolios may be impacted after the Federal Reserve announcement. The investment world has been watching Janet Yellen and the Fed for over a year now, so whether the change is symbolic or actually means something, Steve notes that we’re still in an accommodative Fed policy and some of the excitement of a 25 basis point increase has already worn off. The difference in terms of policy is there, but the question is to what extent, and what impact it will have on 2016.
One area to examine is overall portfolio construction. Some factors to consider are the risk to fixed income, which depends on interest rates (for instance, a retirement portfolio), and whether the Fed can continue on the path of increasing basis points. Adding some certainty to rates helps from a portfolio perspective, especially as many managers have anticipated the hike and were positioned accordingly. However, the investment world is still looking for something that generates yield. A quarter of a basis point on the Fed funds rate doesn’t push yields further out on the curve, but it does add risk to some of the yield that investors have become accustomed to, especially retirees.
Looking to 2016, investors can benefit from being adaptive. From a technical perspective on the S&P 500, some of the upward momentum that was pulling everything along started to wane, leaving certain strategies to fare better than others. As the markets remain in a flat or slightly downward trend, investors can benefit from having different strategies for different market conditions. Through all this, Steve and Manifold Fund Advisors remain focused on diversification, not just in stocks and bonds, but with ETF strategists, stock pickers and quantitative approaches, even overlays with black and white rules. With these types of strategies and more fundamentals returning to the market, Steve hopes to see fewer headlines focused on Janet Yellen and the Fed, and more opportunities for money managers to gain alpha.
The views and opinions expressed in this article are for informational purposes only and not for the purpose of providing investment advice, are those as of the date of the interview and are subject to change at any time. The investment strategies discussed are not appropriate for every investor and investors should review with their advisors the appropriateness of any investment strategy. Manifold Fund Advisors LLC makes no guarantees on the completeness or accuracy of information provided herein.
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