A Client asks:

I have a friend who is thinking about rebalancing her retirement portfolio from one that’s high-risk and heavy on stocks, to a lower risk one that’s more inclusive of bonds. Is this something people are doing now? Or is it smarter to wait for the election? Or does that even matter?

We’ve been having this conversation a lot lately with the strong stock market rally contrasted with the temptation of high-yield (and less volatile) bonds.

A Most Important Disclosure: The answer depends on a lot of personal circumstances, including

• When you plan to use the money

• How much you’re saving along the way

• What your family income and expenses look like

• What the rest of your assets and liabilities are

• etc.

With that said, there’s no blanket answer, so the following isn’t investment advice.

Here are our general 2024 halftime thoughts:

Election years usually have above-average volatility, and this year is no exception. Most people expected a pullback, but volatility worked positively in 2024. The market is up 16%+ at writing, nearly double the average full-year return. So far, returns have eclipsed even the most optimistic forecasts for 2024.

The big question: How much Risk does your portfolio need?

From a market history perspective, stock market valuations today are above long-term averages (price-to-earnings ratio). Many popular professional investors are arguing about whether we’re in another market bubble. These aren’t discussions that happen during bear markets.

Meanwhile, several investment-grade bonds are currently paying 5-7% interest with less volatility than equity markets. If your long-term investment plan requires a 7-8% annual growth rate, bonds are probably looking like a pretty attractive addition.

We’re not big believers in event-based investing, the presidential election included. There will certainly be winners and losers based on economic policy and trade agreements, but predicting them is difficult at best. We’ve all learned over the past 4 years that unusual events can lead to unusual outcomes. And aftershocks can last years.

The best portfolio allocation for most people? one that lets you sleep at night.

I’ve never seen a nervous investor produce impressive returns. If a portfolio is currently feeling too risky, you likely already have your answer regarding when to rebalance.

Life events are an acceptable time to make a big rebalance. There’s a reason they call it personal finance: people have goals, uses, and timeframes for their money. If one were investing for eternity, having an aggressive stock allocation would be the most logical choice.

In this investor’s case though, it sounds like a rebalance might be appropriate.

If you still have questions, reach out to an advisor who can get to know you, and your situation, and give you more specific and actionable investment planning advice.