They added that there is no simple solution to help navigate from the current environment. Wei Li, BlackRock’s global chief investment strategist, said that portfolios have to be constantly modified and adjusted to accommodate changes in the economy.
“We have to be more dynamic,” she said. “We have to be more faster and frequent in adjusting portfolios.”
Li added that the investment industry can no longer rely on traditional model portfolios such as the 60/40 model.. In fact, Li said 2020 represented the worst performing year for such allocations in decades.
One investment vehicle that provides the type of flexibility and ability to be nimble in these volatile times are exchange-traded funds (ETFs), said Gargi Chaudhuri, head of BlackRock's iShares Investment Strategy for the Americas.
“You can embrace higher volatility,” she said. “There are certain areas of the equities market that can do well or do better in the rising volatility markets.”
As for inflation and attempts to curb it, the panelists said that the current efforts by central banks to raise interest rates will not solve the problem over the long term. Brazier noted that there are political factors to consider when considering inflation.
“We expect that the central banks to have to live with a bit more inflation,” Brazier said. “But very few central banks have actually acknowledged that to get inflation down requires a recession.”