Key takeaways

  • Periodic portfolio reviews are vital for investors to help ensure their assets are properly positioned consistent with the goals identified in their financial plans.

  • Investors can position assets for long-term success regardless of current market conditions.

  • Tactical portfolio adjustments, dollar-cost averaging and rebalancing are three approaches investors should consider in fine-tuning their investment approach.

Most investors are accustomed to the reality that capital markets do not move in a straight line, but fluctuate in value. This is certainly true for equity markets, but it is also the case in fixed income markets. For example, in 2022, both stocks and bonds suffered significant declines. In 2023, stocks as a whole generated impressive returns, while bonds struggled for much of the year before ending 2023 with modest gains. What will happen over the course of 2024? As with any short-term time period, it’s virtually impossible to predict the direction of the markets.

Sources: Stocks – S&P 500 from S&P Dow Jones Indices. Bonds – Bloomberg U.S. Aggregate Bond Index from Data as of 12/31/22 and 12/29/23.

“The stock market came back a long way in 2023,” says Rob Haworth, senior investment strategy director at U.S. Bank. “Given what has transpired since 2022’s bear market, investors should review their portfolios and determine if it’s still appropriately allocated among major asset classes.”


Strategic portfolio positioning

The primary driver of an investor’s asset mix should be long-term, strategic positions designed to be held over time to meet specific investment objectives. In the current environment, U.S. Bank recommends a neutral portfolio that includes an appropriate mix of:

  • Fixed income. Bond investors may be able to capitalize on today’s much more competitive yield environment. Interest rates are significantly higher today than they were prior to 2022. Although rates could move higher from current levels, today’s more attractive yields create solid potential for fixed income investors.
  • Equities. Market sentiment mostly remains positive at the start of 2024. While investors should be prepared for some ups and downs, the steadiness of the U.S. economy has been supportive of equity markets.
  • Real assets. There are specific opportunities to incorporate real assets (such as real estate investment trusts or REITs) to help balance a portfolio predominantly made up of stocks and bonds.

“This is a time when investors should consider a neutral weighting across these major asset classes,” says Haworth. “That’s an important step to take before you consider tactical adjustments.” Haworth recommends that more risk-sensitive investors may want to explore opportunities to expand bond holdings given today’s elevated interest rate environment. “For some investors, it’s worth taking a closer look at your stock and bond asset mix, because bonds may be able to generate enough yield to allow you to trim your equity position, which can reduce portfolio risk in the long-term.”


Situational strategies

The market environment can also create specific opportunities or ways to help you position assets in a more effective way for a shorter period of time. Here are three situational approaches to consider in the current market environment:


Tactical asset allocation

There may be opportunities to make minor yet important adjustments to the broader, long-term positions represented in your portfolio. However, investors should pursue such short-term tactical moves with prudence. “Specific tactical moves designed to capture a market opportunity within any of those asset classes require investors to be nimble and willing to move quickly in and out of specific positions,” says Haworth.

For example, in today’s environment:

  • Equity investors may want to tilt portfolios slightly toward U.S. stocks over foreign stocks and modestly boost positions in mid-cap stocks (shares of medium-sized companies).
  • Fixed-income investors may want to consider non-government agency-sponsored residential mortgage-backed securities, which can benefit from today’s higher interest rate environment.
  • Insurance-linked securities, tied to the sale of reinsurance products, can offer highly competitive income streams in the current environment for certain types of investors, particularly within trust portfolios.
  • Tax-aware investors can earn extra potential returns from high-yield municipal bonds. While these are on the riskier end of the tax-free bond spectrum, Haworth says credit quality is holding up well in today’s economy.


Dollar-cost averaging

Investors can accumulate cash in their portfolios through interest, dividends, or through security or business sales proceeds. Some investors may still have left cash “on the sidelines” following 2022’s challenging capital markets environment. Investing cash into higher returning asset classes such as equities is key to meeting long-term financial goals. However, markets may still exhibit volatility from time-to-time, which can affect investors’ willingness to put lump sums to work in assets subject to fluctuation such as stocks.

“Given what has transpired since 2022’s bear market, investors should review their portfolios and determine if it’s still appropriately allocated among major asset classes,” says Rob Haworth, senior investment strategy director at U.S. Bank.

Dollar-cost averaging is a strategy that may increase your comfort level with equity investing during volatile times. This involves investing a portion of your cash balance into the target equity portfolio through regular intervals rather than trying to invest the cash all at once (a practice called lump-sum investing).

“Dollar-cost averaging is a way to get money invested without experiencing the regret that would occur if markets decline immediately after investing a lump sum,” says Haworth. “It elongates your investment period, so you don’t start at just one price point in the market.”

Regularly directing assets from cash into the target portfolio of equities and other holdings, for a period of six months to two years, may reduce the risk of a large portfolio setback in a brief period of time. “It’s an effective and efficient way to invest so you participate when the market environment is favorable,” says Haworth.



Investors should consider regularly rebalancing their portfolios. Asset prices can move in different directions and at different speeds, and these return variations can cause your initial portfolio allocations to drift from your long-term strategy.

Fixed income portfolios may require attention if investors emphasized high-yielding, short-term debt securities up to now. “Prior to 2023, investors were dealing with interest rates that were still rising, a more risky environment for long-term bond investments,” says Haworth. “We appear to be at a point where short-term interest rates are near a peak. This may be a time for investors to lock in higher, long-term rates to protect their portfolios for the long run.”

Sources: S&P 500/DJ All Equity REIT – S&P Dow Jones Indices; Bloomberg U.S. Aggregate Bond –; U.S. 30-90 Day Treasury – Morningstar. As of Feb. 6, 2024.

“Periodic rebalancing across asset classes with the most significant differences in return and risk, such as stocks and bonds, enhances long-term returns and is effective at managing overall portfolio risk,” notes Haworth. “We first suggest evaluating your relative stock/bond allocation and using recent performance differences to nudge your portfolio back toward its target allocation. Additionally, within an asset class such as mid-cap U.S. stocks, we suggest examining allocations where growth and value style performance has materially diverged.”

Notably, some growth-oriented S&P 500 sectors that were hard hit in 2022, such as technology, bounced back in 2023. Even in that short period of time, you might find some of your portfolio positions out of balance. “Make sure you own what you want to own,” says Haworth. “If you have significant positions in assets that have become expensively valued, you may want to reposition those holdings as a way to help manage portfolio risk.”

The table below details annual performance across a variety of asset classes (represented by market indices) for the past five years.

Period ending 12/31/2023. Source: Morningstar. Past performance is no guarantee of future results. Returns shown represent results of market indexes and are not from actual investments and are shown for ILLUSTRATIVE PURPOSES ONLY.


Maintain a well-positioned portfolio

As you seek to properly position your portfolio, consider tactical adjustments to take advantage of specific opportunities that have emerged in today’s market. Use dollar-cost averaging to put money to work systematically over time and limit the potential downside risk of a large, lump-sum investment. In addition, rebalance your portfolio positions to align your asset mix with your goals, time horizon and risk tolerance.

Your wealth management professional can be instructive in helping you blend and select strategies to keep your portfolio on target to help meet your long-term investment plans and goals.


The S&P 500 Index consists of 500 widely traded stocks that are considered to represent the performance of the U.S. stock market in general. The Russell Midcap Index measures the performance of the mid-cap segment of the U.S. equity universe and is a subset of the Russell 1000 Index. It includes approximately 800 of the smallest securities based on a combination of their market cap and current index membership. The Russell Midcap Growth Index measures the performance of the mid-cap growth segment of the U.S. equity universe. It includes those Russell Midcap Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell Midcap Value Index measures the performance of the mid-cap value segment of the U.S. equity universe. It includes those Russell Midcap Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index and is representative of the U.S. small capitalization securities market. The MSCI EAFE Index includes approximately 1,000 companies representing the stock markets of 21 countries in Europe, Australasia and the Far East (EAFE). The MSCI EAFE Value and Growth Indices covers the full range of developed, emerging and All Country MSCI Equity Indices. The MSCI Emerging Markets Index is designed to measure equity market performance in global emerging markets. The Dow Jones Equity All REIT Capped Index is designed to measure all equity REITs in the Dow Jones U.S. Total Stock Market Index, as defined by the S&P Dow Jones Indices REIT/RESI Industry Classification Hierarchy, that meet the minimum float market capitalization (FMC) and liquidity thresholds. The FTSE Global Core Infrastructure 50/50 Index and FTSE Developed Core Infrastructure 50/50 Index give participants an industry-defined interpretation of infrastructure and adjust the exposure to certain infrastructure sub-sectors. The constituent weights for these indexes are adjusted as part of the semi-annual review according to three broad industry sectors — 50% Utilities, 30% Transportation including capping of 7.5% for railroads/railways and a 20% mix of other sectors including pipelines, satellites and telecommunication towers. Company weights within each group are adjusted in proportion to their investable market capitalization. The Bloomberg U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities. The Bloomberg U.S. Municipal Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar denominated, fixed tax-exempt bond market. The index includes state and local general obligation, revenue, insured and pre-refunded bonds. The ICE BofAML U.S. High Yield Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market.

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