News

In this month’s Orange County Financial Planning Association meeting, roundtable discussions developed around trending factors taking shape in 2022.

Overall, the general tone leaned toward interest rate increases and continued inflation being a key concern this year, which has many investors questioning volatility and potential corrections in the stock and bond markets. While most advisors believed there is a low probability of a recession, there was some discussion about the impact of an inverted yield curve where short-term rates generate higher yields than long-term rates. Often, an inverted yield curve can signal a recession, and a flattening of the curve could be the market telling us that something is brewing.

Given the present environment, advisors and investment companies are looking to reduce volatility and interest rate exposure in their client portfolios. Reallocating funds in alternative investments such as real estate, gold, and commodities can be an effective way to hedge against inflation and volatility, and may help to bolster a portfolio’s performance during times of uncertainty.

Investors with a lower risk tolerance are also eyeing other wild cards this year. Russia’s invasion of Ukraine, the post-COVID-19 rebound, and upcoming mid-term elections may prompt some investors to take shelter in alternative, more conservative investment opportunities.

This means that it’s a good time to consider an allocation into fixed income alternatives that are not correlated to the stock and bond market, have little to no sensitivity to interest rates, and has a competitive rate of return.

Historically, real estate has performed well to protect against inflation. However, in today’s environment, other factors may impact equity investments in real estate.  Therefore, investors looking to build resiliency in their portfolios with investments backed by hard assets, such as real estate, are using real estate debt investments as a lower risk alternative.

Our recent market trends article summarizes certain sectors of the real estate market that Wilshire believes are high-performing alternative investment options that can help protect portfolios from inflation and market volatility. The WFP Income Fund’s investments in first trust deeds and mortgages are secured by seniors housing, healthcare, multifamily, and commercial real estate and provide attractive risk-adjusted returns to its investors while providing Principal Protection.  Learn more about Wilshire’s short-term alternative fixed-income investments.

The Financial Planning Association of Orange County

The Financial Planning Association of Orange County connects those who provide, support, and benefit from professional financial planning. They represent a community of over 500 professionals whose vision is to be the voice and resource for financial planning in Orange County.