Building a Beta Portfolio in an Environment That Looks Difficult for Assets

Bridgewater

Research

17 Pages

Bridgewater Associates explains how to hold beta when inflation and Fed tightening create headwinds across most assets. They argue holding cash is not a real solution if it is eroding wealth around 5% per year. A provocative point is that stagflation risk looks as high as it has in about 100 years, so a more balanced portfolio may matter more than usual.

Date published: May 31, 2022

Source: Bridgewater

Key Takeaways

Cash is costly: They argue cash can destroy real wealth around 5% annually in today’s inflation backdrop.
Balance targets stagflation: A balanced mix aims to neutralize rising inflation and falling growth risks.
Recovery profile: Balance recovered faster in Stagflation cases, about 20 months versus 37 months.

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