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Market Perspectives - January 2013

2013 outlook: Love risk by managing it


After a contentious political battle in the U.S., investors may be hoping for a little reprieve from politics. Sadly, we don't think 2013 will give investors that type of break. In February, there will be an election in Italy. In June, there will be an election in Iran. In September or October, there will be an election in Germany. Each of these events could be preceded by market volatility. Even in the U.S., the fiscal cliff debate didn't set the stage for a politically quiet two years as we wait for the 2014 mid-term elections. With uncertainty comes risk, and we believe risk management should be front and center for investors in 2013. Sitting in cash is costly in terms of lost opportunities and the corrosive effects of inflation—even if inflation stays low. Trying to jump on and off the risk-on/risk-off train could be a dangerous game as well. Staying globally diversified and adapting to emerging opportunities and threats may not let you love risk, but at least it might help you stomach it.


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