According to a new survey by the alternative investment platform AssetTribe, the demand for alternative investments is expected to grow by up to 46% over the next 12 months. The research showed that the growth in demand for alternative assets is due to the current rate of inflation, an increasing need to diversify portfolios, and the potential for higher returns. The survey was conducted with over 580 sophisticated investors across the UK and Europe. According to the survey, the most popular alternative assets were real estate at 75%, long-term asset funds at 62%, and carbon net zero funds at 51%. The survey also showed that the wealthiest participants invested far more in alternatives than those with smaller portfolios.
Finsum: Due to inflation, diversification, and the potential for higher returns, the demand for alternative investments is expected to rise almost 50% over the next 12 months.
Even with the market up for a third straight day, don’t expect volatility to disappear anytime soon. That is according to two market strategists. In a recent media appearance, Citi's Institutional Clients Group chairman Leon Kalvaria warned that more market volatility is to be expected until inflation and rate hikes stabilize. In a separate media appearance, BlackRock Americas iShares Investment Strategy Head Gargi Chaudhuri also says he expects volatility to continue on the backdrop of higher inflation and increased politicization. Recent gains aside, with rates expected to continue to move higher and consumers feeling the crunch of higher energy and food prices, market volatility is likely here to stay.
Finsum: With more expected rate hikes to combat persistent inflation, don’t expect market volatility to disappear anytime soon.
Investors are shortening up their duration to the ultra-short fixed income ETFs which were first created about 15 years ago. Originally used for cash management, many investors are looking to these ETFs for security in the economic turmoil flummoxing markets currently. Generally, these assets have been tough to classify but by in large they are of duration of less than a year. SPDR Bloomberg 1-3 Month T-Bill ETF and State Street Global Advisors saw large inflows in the first half of 2022. While these assets generally get an uptick during volatility, they are seeing special attention due to interest rate risk. With inflation setting 40-year records investors want security against the Fed's rapid tightening cycle which is pushing up yields and bond prices lower. This means they are buying ultra-short duration debt with less risk.
Finsum: The latest GDP release will be a huge tell for the Fed because it could stall tightening if we slip into a recession.
Artificial Intelligence has revolutionized many industries, but it has also had a profound impact on the financial world. The next phase could be producing alpha-generating model portfolios. Models are already widely used in the financial world with more than 4/5ths of advisors utilizing them for their clients. Companies like UX Wealth Partners are taking that to the next level by integrating the latest machine learning techniques into their strategies to gain an edge. One such example is AIQQAI which uses patterns and probabilities to determine a bullish or bearish outlook on the market for the next week which decides how much to invest in cash vs the QQQ ETF. This has led it to have a 26 percentage point advantage over the QQQ in almost the whole first half of 2022. Companies utilizing models and embracing technology could forma new path moving forward.
Finsum: Fintech innovations such as machine learning will be critical to the growth of models, ETFs, and direct indexing in the next decade.
Market volatility is seemingly endless these days and with more inflation or even worse, a recession, potentially around the corner, investors need options. However, knowing if the market has bottomed out is hard which is why you should employ a strategy you might already use to get through high volatility, dollar-cost averaging. Most likely already implemented in your 401(k) contributions, dollar-cost averaging is putting fixed amounts over periods of time into the market, say monthly or bi-weekly. This helps mitigate the risks of lump-sum investing at the wrong time but still keeps a steady long-term approach to your financial investment. Dollar-cost averaging is the Goldilocks solution to timing the market and sitting out the volatility and for young investors, it's an especially great strategy to keep in a long-term approach.
Finsum: No need to get wildly creative in volatile times, simple strategies can be enough to navigate high volatility.