With the uncertainty around trade fading, investors are starting to focus on the long-term and consider how to build a more resilient portfolio. Seasoned investors often look to a handful of investment trends that they believe can generate significant gains over many years.
US stocks have had a stellar run since the Global Financial Crisis, thanks in part to the dominance of growth areas such as artificial intelligence where US businesses dominate the space. But the ongoing saga of on-off US tariffs is raising concerns about the future – and the effect it could have on corporate profits and even business models.
For many years now, bonds have been a reliable ballast for many portfolios, providing consistent returns and low volatility. But over the last three years, bond returns have been highly volatile – as central banks first drove rates to record lows to combat deflationary fears and then quickly pivoted to quell multi-decade high levels of inflation. This experience has raised questions about the role that long nominal bonds should play in a well-diversified portfolio.
As interest rates decline, investors are seeking new income streams. Dividend-paying stocks offer an attractive alternative. Typically trading at a discount to the broader market, they have historically delivered solid returns with less risk than the market. As a result, they have become an increasingly important component of a well-diversified portfolio.
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