Financial advisors must hone their skills as fixed income allocators as the market moves later into the economic cycle, said Matt Miskin, co-chief investment strategist for John Hancock Investment Management.
“Fixed income is an important part of a client’s portfolio now,” Miskin said. “If a client has not rebalanced in the last five years, he or she is overweight in equities. Investors should be taking some of those gains from equities and putting them into fixed income.
"If the goal is 60-40 [60% equities and 40% bonds in a portfolio], advisors should make sure the 40% is there and the portfolio is not overweight in equities,” he added.
Miskin discussed John Hancock Investment Management’s Market Intelligence report for the third quarter of 2019 and beyond in an interview on Tuesday with Financial Advisor magazine.
Within the bond segment of the portfolio, movement should be made to medium- and long-term bonds and away from short term, which dominated the market last year for bonds, as well as ETFs and mutual funds.
“Portfolios could even be overweight for long-term bonds for the next couple of quarters,” Miskin said. “Advisors should look at clients’ portfolios with this in mind because getting fixed income right at this time is imperative.”
Investors should concentrate on high quality corporate bonds, which are paying 3% to 4%. Municipal bonds are good from a tax standpoint but are paying at very low rates, he said.
Although the market has seen some volatility, it remains at al time highs and all leading economic indicators remain positive for now, the Market Intelligence report said.
Advisors also should concentrate on risk management because the market is in the late part of a growth curve, Miskin said.
For equities, international markets are better right now than domestic, he noted. Global infrastructure investments are gaining popularity. In particular, alternative energy is attractive and international investments are seeing good returns.