Financial Advisors: Prepared for Rate Rise Fallout?

Financial advisors with clients that have a high net worth might begin to suggest that these clients prepare a defensive portfolio to prepare for future Fed rate increases. This warning comes after the International Monetary Fund’s latest World Economic Outlook—predicting a global GDP growth of 3.5% this year.
This report cautions about a key risk being a ‘cascade of disruptive adjustments’ once the Federal Reserve begins to raise finally interest rates. This makes it harder (and more expensive) to take on new debt and to roll over existing loans.
It’s a possibility that the industry could see another tide of defaults, bankruptcies…and worst case scenario, bank insolvencies in this scenario. As such, high net worth investors should be focusing their strategies and efforts on ensuring that their portfolio is diversified with their financial advisors, preferably with some cash liquidity and avoiding long duration bonds (and possible exposure to banks).
After preparing a defensive investment portfolio with their financial advisors, these investors should sit tight—especially if there’s a market sell-off. Markets tend to recover over time, and there is a significant risk of missing such a recovery if a portfolio has been completely liquidated.
Likely, there will be significant opportunities ahead…and investors will be able to benefit from sell-offs by purchasing bonds and other equities at a discounted rate due to the ‘dollar cost averaging’ effect.
These shifting dynamics must be monitored carefully and managed with tactical allocations by financial advisors to reap the rewards from these opportunities presenting themselves…and to avoid the risk associated with such investment opportunities.