Investing: Isn’t There Something I Should Be Doing?

You may be watching the markets. If so, don’t panic.

No one will be surprised when we say that this past year was brutal for investments of all kinds. Stocks, bonds and just about every asset class had substantial losses amid soaring inflation and aggressive monetary tightening by global central banks. There seemed like there was nowhere to hide.

Will it be more of the same for 2023? And what, if anything, should investors do to weather the storm or take advantage of new opportunities as they unfold in the markets?

First, don’t panic. “The worst thing you can do is hit the eject button at the exact worst time,” says Alan McKnight, Chief Investment Officer at Regions Bank in Atlanta, Georgia. “As humans, we’re very bad at making decisions, particularly when markets are more volatile.”

Unfortunately, it happens all too often. This tendency has been well documented in the field of behavioral finance.

Focus on Basics

Get back to the core of investing: your wealth management plan. Review your goals and your time horizon. Consider how much risk you’re willing to take to achieve those goals. Schedule a check-in meeting with your investment team and consider what actions, if any, are appropriate to take now.

“It’s a great time to look inward,” says Bryan Koepp, Wealth Planning Executive at Regions Bank in Atlanta. “Review your balance sheet and understand it. What are your assets and why do you hold them? What’s their purpose? From there, ask: How can I make it better based upon my defined goals and aspirations?”

What Does the Investment Horizon Look Like?

There’s good news and bad news on the market outlook. The good news is 2022 is behind us. The bad news is we can expect more volatility in the near future.

“I believe we’ll see continued deceleration in corporate earnings in the U.S. equity market as inflation remains stubbornly high,” says McKnight. “Couple that with valuations resetting along with slower revenue growth as we see less consumer demand in the next year or so.”

“So, I expect volatility to continue in both the stock and bond markets as investors parse out the Federal Reserve’s path and additional interest rate increases. We believe the Fed is more likely to pause on rate increases, but not actually pivot by cutting rates this year.”

On the bright side, last year is behind us, and bonds have already dealt with the most aggressive rate increases in decades, leaving yields much higher. McKnight describes the U.S. equity and bond markets as “the best house in a bad neighborhood,” with the global economy slowing and prospects appearing worse elsewhere. For that reason, he advocates a heavier weighting to domestic U.S. stocks and bonds.

We Survived the Worst Year Since 1937

Looking back at 2022, it was the worst year for stocks and bonds combined since 1937 and the third worst year in history for a classic asset allocation of 60% stocks/40% bonds.

For any investors questioning the merit of that 60/40 mix, McKnight says last year was “a once-in-a-market event. We expect a 60% stock/40% bond portfolio to have a better return this year, and we think bonds will do the heavy lifting as the Fed gets to a neutral point on rate increases. It’s a good time to be a bond investor after two negative return years.”

Alternatives Remain Attractive

Real assets, including infrastructure, timber and farm land, real estate investment trusts (REITs), commodities and master limited partnerships, can round out a diversified portfolio, particularly while inflation remains a concern.

“From a holistic perspective, including alternatives in addition to traditional investments, such as equities and bonds, often reduces the risk, or the standard deviation, of your ‘life portfolio,’” says Koepp. “Diversifiers may also reduce overall portfolio volatility, but they should always be considered from a client-prescribed perspective.”

Make Liquidity Exposure an Intentional Part of Your Plan

Just as with asset allocation, the mix of each investor’s liquid and illiquid assets is a key consideration. “Each investor should be aware of their liquidity exposure and make decisions and allocations around liquidity,” says McKnight.

Consider how much liquidity you have in both your public market and private market portfolios. You should also be aware of unintentional sources of illiquidity, such as owning a company or private real estate. For example, you could own real estate directly (an illiquid form of asset ownership) or through REITs (a far more liquid approach). Which form of ownership is right for any given individual should be considered with the larger portfolio in mind.

Having sufficient cash flow is always important, and that should be a holistic portfolio-wide consideration. In the event of a cash flow shortage, you’ll want to avoid a forced sale of any asset just to raise needed cash.

Regular Checkups Are Encouraged

To stay on top of market risks, opportunities and exposures, McKnight and Koepp recommend that clients meet with their investment advisor at least annually, but they recommend more frequent—ideally quarterly—check-ins.

“There are different schools of thought,” says Koepp, “but from a wealth planning perspective, I would encourage multiple projections during the calendar year, in conjunction with any impending major life event.”

“We think quarterly portfolio reviews are a best practice,” says McKnight. “It’s less about short-term performance or making reactive moves and more about the risk that is experienced and making sure people are on track and comfortable with that. At the same time, it’s important to note that people feel more prone to make a change to their investments solely because it feels better. However, it might not be in an investor’s best interest. Very often, we miss out on better returns by not staying the course.”

For example, consider a hypothetical investor who bailed out of stocks in March 2009, at the very ebb of the bear market in the Great Financial Crisis. They would have missed years of bear returns. More recently, someone who panicked and sold in March 2020, just before the COVID-19 market rebound began, would have missed out on a tremendous rally.

“Making frequent changes is more costly and it rarely generates the desired outcome,” says McKnight.

Talk to Your Regions Wealth Advisor About:

  1. How your long- and short-term financial goals may have been impacted by the recent market volatility.
  2. Read our latest monthly economic commentary and discuss whether rebalancing your portfolio makes sense this year.

Interested in talking with an advisor but don’t have one?

Find a contact in your area.


This information is general in nature and is not intended to be legal, tax, or financial advice. Although Regions believes this information to be accurate, it cannot ensure that it will remain up to date. Statements or opinions of individuals referenced herein are their own—not Regions'. Consult an appropriate professional concerning your specific situation and for current tax rules. Regions, the Regions logo, and the LifeGreen bike are registered trademarks of Regions Bank. The LifeGreen color is a trademark of Regions Bank.