Diversifying Within

How Pave Pro can rotate into other asset class exposures while keeping you fully invested in stocks

If additional tariffs are rolled out next year, your clients will need protection against a sudden spike in inflation. Under that scenario, stocks may underperform due to margin compression and valuation concerns. Unfortunately, your fixed income strategies are at risk of stumbling too. Adding additional asset class exposures is a necessary measure to insulate your stock and bond portfolio.

Thankfully, Pave Pro can help you diversify your clients without venturing beyond a 100% long-only stock portfolio, meaning you always stay within clients' preferences. Our portfolio construction software allows you to overweight the Global Macro Sensitivity or U.S. Dollar Sensitivity Factor Tilt to have the following impact on client portfolios:

• Select Overweight on the Global Macro Sensitivity Factor Tilt to tilt Pave Pro towards favoring assets that are more sensitive to the macroeconomic environment. This is a multifactor approach that helps Pave position your clients appropriately for volatile swings in inflation, trade flows, manufacturing, consumption, and so forth. This is especially helpful if certain tariff policies lead to global trade tensions.

• Select Overweight on the U.S. Dollar Sensitivity Factor Tilt to tilt Pave Pro towards favoring assets that are more sensitive to the dollar. In that case, stocks that benefit from the dollar rising, which often happens during stock selloffs and risk-off economic environments, will be more heavily recommended within Pave portfolios. Also, if the dollar begins a long selloff, your portfolio will be populated with stocks that benefit from a weaker U.S. currency.

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Even if you do not choose those specific factor tilts, Pave’s models will automatically lend an element of asset class diversification as it adds exposure to interest-sensitive and commodity-related stocks to your allocation. If inflation rises again, as we expect, energy, mining, and agricultural stocks should see their rankings move up in our models, and Pave Pro’s optimization models should introduce them into your clients’ portfolios with increasing weights.

To learn more, please reach out by emailing sales@pavefinance.com or pressing the button below. We look forward to speaking with you.

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1. Testimonial provided by Josh Allen in April of 2024. Josh is a current client of Pave Finance, Inc. No compensation was provided in exchange for this testimonial.

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