Julian Howard: The new capital preservation

Dampening portfolio volatility

clock • 4 min read

With bonds making less sense than they used to as a means of dampening portfolio volatility, Julian Howard considers where else investors can turn for reliable, low-correlation returns to complement equity allocations

Numerous studies conclude that the long-run return from equities lies somewhere around 7% a year after adjusting for inflation. Equities should indeed continue to deliver strong returns over time but market conditions have evolved. Expected volatility, together with the increasing correlation between equities and bonds, and the long decline in bond yields, cast doubt over the reliability of the traditional equity diversifiers to keep delivering when the road gets bumpy. Where then should investors turn to for a portfolio dampener to smooth out their expected return profile? What is the n...

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