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A balanced portfolio is more important than ever

Eric Lidemark, CLU, CFP, CHS profile photo

Eric Lidemark, CLU, CFP, CHS

Certified Financial Planner
Lidemark Financial Group Inc.

The stock market doesn’t seem to know where it wants to move right now.

One day, prices are up after some semi-encouraging news about the resumption of U.S.-China trade talks. The next day they’re down over worries that U.S. President Donald Trump will slap tariffs on imported goods from the European Union. On Friday, the Dow fell after a strong U.S. jobs report because, as many market pros put it, “good news is bad news for stocks." That’s because greater job creation makes it more difficult for the Federal Reserve Board to lower interest rates.

In short, there is no direction at this point, just confusion.


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The first six months of the year produced double-digit returns for the major indexes in Toronto and New York. The TSX was ahead 14.4 per cent for the first half of 2019 while the S&P 500 gained 17.4 per cent and the Dow advanced 14 per cent. European equities also did well, with the Euro Stoxx 50 Index up more than 20 per cent.

Those are great results. Enjoy them. I don’t think we’ll see a repeat in the second half of the year. There are too many uncertainties out there, with Mr. Trump’s manipulative use of tariff threats heading the list. Second-quarter earnings, which are expected to be down from a year ago, could also be a drag on the markets.

All the major U.S. indexes and the S&P/TSX Composite have hit record highs this year. Maybe they’ll keep moving up – momentum is a powerful force with investors. But I wouldn’t bet on it. This may be a good time to become more defensive with your money.

I have always advocated the value of a balanced portfolio. Given the uncertainty facing equities in the second half of the year, I consider it even more important than ever to allocate a reasonable percentage of your assets to bonds right now.

Many people are reluctant to do that, given the continued strong bull market. But prudence suggests some rebalancing if your assets are more than 70 per cent in equities.

It’s not as if bonds are a wasteland. Yes, stocks have outperformed them so far this year, but bonds have produced some decent returns since the U.S. Federal Reserve Board indicated that rate cuts, not hikes, are coming.

A well-balanced portfolio for someone under the age of 60 at this time would be 60 per cent to 70 per cent equities and 30 per cent to 40 per cent bonds and cash. For older people, a 50-50 split would be more appropriate. You can do the rebalancing yourself, or you can buy units in a balanced mutual fund or exchange-traded fund, where the managers do it all for you.


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Eric Lidemark, CLU, CFP, CHS profile photo

Eric Lidemark, CLU, CFP, CHS

Certified Financial Planner
Lidemark Financial Group Inc.