1. Reconsider the 60/40 Portfolio
Historically, investors have relied on typical portfolio allocations of 60% in equities and 40% in bonds, in the effort to balance their portfolios between growth and protection. Looking forward, the traditional 60/40 may no longer provide the benefits of the past. Equity markets are trading at, or near, some of their highest valuations and have become increasingly more volatile with large sudden swings. This is all while the 10-year United States Treasury rate is at, or near, its lowest rate; becoming increasingly more correlated to equities than ever before, suggesting its benefit of being a counterbalance to equity risk may be diminishing.
This is where alternatives come into play, which offer returns typically uncorrelated to equities and bonds and can help mitigate risk in portfolios. In addition, private markets such as private debt and equity may offer attractive returns in excess of public markets, due to their ability to provide excess returns from the limited liquidity they offer.