2022 Investment playbook
Unique cycles call for a new take on the typical investment playbook. In light of the current resource disorder and inflation concerns, here’s where the economic rubber meets the investment road.
As noted in the section on Cycles, we purposefully concentrate on the nuances of the economic cycle. Years of experience have taught us that viewing a portfolio first through an economic lens can provide clarity and structure to an investment process.
The approach starts with economic analysis, upon which we layer myriad market and strategy considerations. While history provides a reference, we know each economic cycle is unique. The resource disorder and attendant inflation concerns plaguing this cycle are the most distinguishable factors altering our investment playbook.
Highlights:
- The Deceleration stage has been the most frequent and is once again where we find ourselves today
- The best returns for risk assets, including large-cap, small-cap, and cyclical equities have occurred during the Troughing stage of the economy
- The Deceleration stage has historically delivered modest albeit positive average monthly returns across almost every asset class, sector, and factor, despite the economy’s strongest growth being in the rearview mirror
- Diversification is paramount
Building resilient portfolios
Our base case for the year ahead is above-trend U.S. economic growth of 3.5%, with inflation moderating over the next 12 months. The economy is supported by a recovering labor market, strong capital expenditures, and an inventory-rebuild cycle. Deployment of technology is aiding corporate productivity and profitability. Barring a widespread resurgence of another COVID-19 variant post Omicron, we expect interest rates to move higher, with the 10-year Treasury approaching 2% on a 9–12-month horizon. We hold an overweight allocation to equities, versus our long-term strategic benchmark, and an underweight to fixed income. Portfolios hold a slightly elevated level of tactical cash to be deployed opportunistically in the months ahead.
Data as of 11/30/2021 and based on the High Net Worth portfolios holding municipal bonds (Growth & Income risk profile):
Tactical tilts | Positioning | Underweight Neutral Overweight |
Equities U.S. Large Cap |
Overweight |
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Equities U.S. Small Cap |
Overweight |
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Equities International Developed |
Overweight |
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Equities Emerging Markets |
Overweight |
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Tax-Exempt Fixed Income Investment Grade |
Underweight |
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Tax-Exempt Fixed Income High Yield |
Neutral |
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Real Assets |
Underweight |
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Alternatives |
Underweight |
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Cash |
Overweight |
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Understanding the charts

Current tactical (short-term) positioning to that asset class is underweight versus our long-term strategic target. The further from the N (neutral), the more underweight.

Current tactical positioning to that asset class is neutral versus our long-term strategic target.

Current tactical positioning to that asset class is overweight versus our long-term strategic target. The further from N, the more overweight.
This material is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or a recommendation or determination that any investment strategy is suitable for a specific investor. Opinions, estimates, and projections constitute the judgment of Wilmington Trust Investment Advisors, Inc. and are subject to change without notice. Allocations presume a long-term investment horizon. Source: WTIA.
An overview of our asset allocation strategies
Wilmington Trust offers seven asset allocation models for taxable (high-net-worth) and tax-exempt (institutional) investors across five strategies reflecting a range of investment objectives and risk tolerances: Aggressive, Growth, Growth & Income, Income & Growth, and Conservative. The seven models are High-Net-Worth (HNW), HNW with Liquid Alternatives, HNW with Private Markets, HNW Tax Advantaged, Institutional, Institutional with Hedge LP, and Institutional with Private Markets. As the names imply, the strategies vary with the type and degree of exposure to hedge strategies and private market exposure, as well as with the focus on taxable or tax-exempt income. On a quarterly basis we publish the results of all of these strategy models versus benchmarks representing strategic implementation without tactical tilts. Model strategies may include exposure to the following asset classes: U.S. large-capitalization stocks, U.S. small-cap stocks, developed international stocks, emerging markets stocks, U.S. and international real asset securities (including inflation-linked bonds and commodity-related and real estate-related securities), U.S. and international investment-grade bonds (corporate for Institutional or Tax Advantaged, municipal for other HNW), U.S. and international speculative-grade (high-yield) corporate bonds and floating-rate notes, emerging markets debt, and cash equivalents. Model strategies employing nontraditional hedge and private market investments will, naturally, carry those exposures as well. Each asset class carries a distinct set of risks, which should be reviewed and understood prior to investing.
Allocations
Each strategy is constructed with target weights for each asset class. Wilmington Trust periodically adjusts the target allocations and may shift away from the target allocations within certain ranges. Such tactical adjustments to allocations typically are considered on a monthly basis in response to market conditions. The asset classes and their current proxies are: large–cap U.S. stocks: Russell 1000® Index; small–cap U.S. stocks: Russell 2000® Index; developed international stocks: MSCI EAFE® (Net) Index; emerging markets stocks: MSCI Emerging Markets Index; U.S. inflation-linked bonds: Bloomberg/Barclays US Government ILB Index; international inflation-linked bonds: Bloomberg/Barclays World exUS ILB (Hedged) Index; commodity-related securities: Bloomberg Commodity Index; U.S. REITs: S&P US REIT Index; international REITs: Dow Jones Global exUS Select RESI Index; private markets: S&P Listed Private Equity Index; hedge funds: HFRI Fund of Funds Composite Index; U.S. taxable, investment-grade bonds: Bloomberg/Barclays U.S. Aggregate Index; U.S. high-yield corporate bonds: Bloomberg/Barclays U.S. Corporate High Yield Index; U.S. municipal, investment-grade bonds: S&P Municipal Bond Index; U.S. municipal high-yield bonds: Bloomberg/Barclays 60% High Yield Municipal Bond Index / 40% Municipal Bond Index; international taxable, investment-grade bonds: Bloomberg/Barclays Global Aggregate exUS; emerging bond markets: Bloomberg/Barclays EM USD Aggregate; and cash equivalents: 30-day U.S. Treasury bill rate.
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