Is your retirement portfolio all-weather?

Checking up on these five risk factors can help ensure you're not casting your lot with a single outcome.

Christine Benz 16 July, 2018 | 5:00PM

Much like our early summer weather, the market environment has felt more changeable than usual; while global stocks started 2018 on a strong note, they limped through the early spring, recovered in May, then flatlined again last month due to trade-related worries.

Market sentiment seems to be teetering between major--and basically opposing--scenarios. If economic growth remains robust, that could spark inflation and/or prompt central banks to take an even more aggressive tack on interest rates than they have already outlined. Such a scenario would continue to weigh on bond prices and could have a negative effect on stocks, too.

Lately, however, it seems that market participants are contemplating the opposite possibility--slowing economic growth and perhaps even a recession. The U.S. yield curve is currently flat, meaning that long-term bonds are yielding no more than shorter-term ones. The fact that investors aren't demanding any extra recompense for owning long-term bonds indicates they believe inflation--and in turn interest rates--will remain low. Historically, an inverted yield curve (a step beyond today's flat yield curve)--when investors are demanding a higher yield from short-term bonds than they are from long-term--has been a harbinger of economic weakness to come.

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About Author

Christine Benz

Christine Benz  Christine Benz is Morningstar's director of personal finance and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances and the Morningstar Guide to Mutual Funds: 5-Star Strategies for Success. Follow Christine on Twitter: @christine_benz.

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