With equities and bonds deflating, and inflation and
interest rates heating up, investors take a fresh look
at tangible assets
2019
best risk-adjusted returns that are aligned with
their goals and objectives over the next five to
10 years.
Today, the consensus at MAI Capital Man-
agement is the universe is shifting in ways that
make real assets compelling, although investors
must be highly selective.
DIVERSIFICATION MATTERS
In what ways are the stars realigning? For
starters, Buoncore and his colleagues believe
that stock market returns will be more mod-
est in the near term and volatility will likely
increase. ey expect the market to return
roughly 5 percent to 6 percent per year over
the next five years. at is a far cry from the
returns for 2016 and 2017, when the S&P
500 gained nearly 12 percent and 22 per-
cent, respectively.
"e stock market's been on a 10-year run
and, while it may not be overvalued, it's cer-
tainly at best fairly valued," says Buoncore,
managing partner of MAI Capital Man-
agement. "We still have to be there, but on
the fringe, we'd rather allocate to things we
think are very good, solid investments with
less risk and equal or better returns."
Buoncore and others are even more con-
cerned about the bond market outlook in light
of the fact that the Federal Reserve is likely to
continue to raise short-term rates to keep infla-
tion in check and give itself ammunition to
fight the next recession. At the same time, the
Fed is draining liquidity from the fixed-income
market as it pursues quantitative tightening —
or the unwinding of the extraordinary quanti-
tative easing stimulus program it implemented
during the financial crisis.
"e Fed will continue to raise rates to
normalize our situation," says Buoncore,
noting that interest rates remain low by his-
torical standards. As a result, "you have to
OUTLOOK FOR
REAL ASSETS
REALASSETS ADVISER
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