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The Investor’s Dual Dilemma

Investors are facing a portfolio dilemma on two fronts.

The State of Fixed Income Markets
  • Going forward bonds may not earn the returns they have over last 30+ years.
  • Rising inflation and Fed rate cuts punish savers, forcing them to stretch for income and risk principal.
The State of Equity Markets
  • Equity markets are volatile and unpredictable (e.g. COVID-19).
  • Meanwhile mounting global debt, demographic challenges, and geopolitical risks threaten global growth.
It’s a Rock and a Hard Place Scenario

Elevated and sticky inflation coupled with Fed rate cuts rates punish savers, forcing them to stretch for income and risk principal. Meanwhile, if long-term U.S. bond yields rise, their price (account value) will be eroded. On the other hand, higher-yielding bonds act more like equities when markets are in turmoil.

 

As such, to outpace inflation and achieve long-term goals, investors are forced to build financial plans that rely on riskier assets, such as equities, for growth. 

Did You Know?

A 1.00% rise in interest rates would result in a

drop of 9.89% in the value of long-term bonds.*

Since 1929, the S&P 500 data shows that, on average, bear markets:

  • Occur every 4.2 years
  • Erase over 34% of market value
  • Take 2.8 years to recover**

Navigating the Dual Dilemma

How are you prepared for these historic challenges?    

What are you doing differently?

 

Since 1997, the Swan Defined Risk Strategy has addressed this Dual Dilemma.

 

Explore how you can remain always invested, always hedged seeking growth and portfolio protection.

Review the Defined Risk Strategy

Dual Dilemma Related Articles

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Rising Inflation & Interest Rates: Culprits Behind Market Turmoil How inflation and rising interest rates negatively impacted so many different investments around the globe.
Consequences of Inflation on Stocks Learn how inflation may affect stock markets and how investors can combat the consequences of inflation.
Maximizing Opportunities in Derivative Income with an 'Active-Active' Approach Identify the benefits of a derivative income strategy that combines active management of both the underlying stocks and the options strategies for investors seeking more sustainable income and capital appreciation.
Hedged Equity: For the Best of Times, For the Worst of Times Active hedged equity strategies are a full market cycle solution, serving investors in both bear markets and bull markets, by mitigating risks of major losses without forcing a cap on upside market participation.

* Source: Morningstar Direct. Effective duration as of 1.31.224** Source: Bank of America Merrill Lynch, Global Research, Bloomberg, Swan Global Investments: Returns based on S&P 500 from 1929 through December 31, 2024; Zephyr StyleADVISOR