A message for our clients. Do you have the right portfolio for the current climate?

Do you have the right portfolio for the current climate?

For years wealth managers have been able to rely on US equities for their returns. The S&P 500 has delivered an average annual return of 10.13% since 1957. Yes, there have been negative years, and there always will be, but concentration risk in the S&P 500 has never been higher. Just 10 stocks account for 33% of the value at the start of 2025. This is higher than the 27% concentration during the 2000 tech bubble.

We aren’t suggesting that will happen again. The consequences of that will never be forgotten and price-to-earnings ratios are nowhere near where they were in 1999. However, that doesn’t mean that they aren’t high, they are.

When market values are high, we see short-term pullbacks like the one we’re seeing at the moment. Sometimes that keeps going and we get a market correction (>10%). It could be a good time to buy, or it might be a good time to sit out and see what happens next. As an individual investor, this isn’t likely to be something you would make a call on, and why would you, you aren’t a professional trader, and neither is your wealth manager. At TPP, that’s exactly what we are.

This feels like a time to diversify; to actively trade portfolios as much as possible, moving in and out of the fluctuating market in order to increase returns. Does your IFA do this? Of course not, they can’t, not like we can. We have specialist strategies for all occasions. Right now, markets seem high in the US. Nvidia has fallen 25% from its highs, as has Tesla and they could fall further. How are you positioned?

The good news for TPP clients is that this is what we do. We are active in our management. Our long/flat strategies have been designed with a stagnating market in mind. A diversified portfolio should have a range of strategies and this is also the case for TPP clients.

We are fans of trackers, they have a place, but they shouldn’t sit alone as the only plan. It is also impossible to know which market will do well in any given year. Last year the Taiwan exchange outperformed, so far this year it’s made nothing. The S&P performed, yet this year it’s down over 2%.

If you already have an S&P tracker, maybe put in a FTSE 100 tracker too. These markets are very different and multiple markets disperse the risk. Maybe expose your portfolio to the Europe 50, or even the Europe 600 to capture the whole continent. At TPP we offer a variety of underlying markets giving clients the diversification they need.

‍

As well as trackers, add a couple of our long/flats. In a stagnant market, these really stand out. Last year, nearly all our long/flats were profitable even when their benchmarks weren’t. The U.S. markets made money, but the FTSE stood still, yet one of our FTSE long flats made 20% in that same time.  They will buy in after the market falls and sell out after it rallies. It sounds simple, but only because we make it sound that way. With decades of trading experience, our traders work out the timings of buying in and selling out using a variety of economic and trading data. We do the hard work, you just watch it happen.

Diversify. Markets are jittery, so put another strategy into your portfolio if you can. We don’t know which markets will rise this year, so cover your bases by having 2 or 3 trackers. The same goes for the long/flats. One might make 20% again but another only 8%. It’s impossible to know, so again, diversify.

We will do the hard work and create the trading strategies for all occasions. As your discretionary manager, we will talk you through them, but ultimately, what you choose, and how you spread your risk is up to you. The more strategies, the less exposure to any one equity index. It feels like the right time to spread risk, so if you would like to discuss how to do this, please do get in touch with one of our professional traders by emailing us here.

‍