Alternatives

What exactly are Alternative Investments?  For our purposes, they include any investable asset class that is not highly correlated to either the stock or the bond markets.  Over the course of the last 5 years, alternative asset classes have become more correlated, to stocks, bonds, and each other.   Among the reasons for this are the explosion in the amount of money invested in hedge funds, which rely heavily on alternative investments for their outsized returns.  But in spite of this convergence, we still recommend that a portion of your assets be invested in this space.  Diversification may not work as well as it once did, but it still works. 

Energy-based commodities have rallied strongly, but from an oversold condition.  We believe that the bulk of this rally is now behind us, and until there is more solid global economic growth, investors would be better off in other commodity plays.  

Gold and Silver are still a good choice for investors at this point.   Commercial real estate has been under pressure for several months now, and we expect further weakness in this space.  

And volatility, until very recently, has been a weak performer.  Accordingly, we have made some changes to our model portfolios to reflect the relative valuations of these alternative asset classes.  As the stock market rally loses momentum,  volatility will once again be a good place to seek diversification and shelter.