Two recent surveys—one by kasina, a consultant to asset managers and insurance companies, and another by Oppenheimer—of over 2300 advisors asked what factors were most likely to affect investor portfolios in the near future. The crisis in Europe was the number one answer. It beat other answers including oil prices, the US presidential election, unemployment, or some other event.
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The kasina survey said 47% of advisors pointed to Europe as the factor having the greatest impact. In the Oppenheimer survey, 59% said Europe was the biggest influence on their advice to clients but that they also had their clients’ portfolios well positioned to weather short-term volatility.
Many advisors have significantly cut their clients’ exposure to international bonds and equities as a result. Forty-two percent recommended clients keep their portfolio allocations as they currently stand. Most advisors are focusing on the long term, trying to keep short-term concerns out of client focus.
Emerging markets and dividend paying stocks, however, are prime choices for income in the low interest rate environment. Dividend paying stocks are being recommended by 84% of advisors and emerging markets by 76%.
While lessening exposure to international bonds and equities may be appropriate for the short term in managing risk
from Europe’s still uncertain environment, keeping some cash on hand to reinvest when opportunity emerges might be a very good idea.