As the Economy Slows, Which Investment Strategy Is Right for You?

This was a week of contradictions for investors looking to divine the future in the stock market.

On Monday, the S&P 500 closed at a record high; the index is up some 20 percent for the year.

But by Wednesday morning, the S&P was sinking after the Commerce Department reported that the economy grew at an annual rate of 1.9 percent in the third quarter, lower than last quarter’s 2 percent annualized rate.

Later that afternoon, the Federal Reserve announced it had cut interest rates by another quarter of a percentage point, sending the market back up to close at a new high.

The whipsawing of the market raised anxiety for investors eyeing their portfolios, which have generally notched excellent returns over the past decade.

These investors, particularly affluent ones with greater access to financial products, are most likely being approached by advisers with new strategies to take advantage of this moment, where the markets are doing well but polls of economists and voters say a recession is coming.

I want to focus on two investment strategies that are tugging on affluent investors, offering different risks and returns.

One is the endowment model, a push to increase allocation in private investments, like private equity, private credit and real estate. These investments promise higher returns that are not aligned with the public markets and should, the argument goes, perform better when a recession hits. This approach is akin to the model large endowments have used successfully for decades.

A more traditional strategy is a modified 60/40 investment portfolio, which is split between equities and fixed income and offers

Keep reading this article on The New York Times Your Money.

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