Elevated inflation, market volatility, and evolving Fed policy are changing the dynamics of portfolio construction.

So how should investors invest during times of market stress?

There's a benefit of getting more active in asset allocation compared to the last 10 to 20 years where a buy and hold 6040 portfolio did really well and you didn't really have to become active because when the bear markets

happened it was very concentrated in a short period of time and you had very long

cycles whereas now bear markets might actually be smaller but more frequent and that creates much more market

timing opportunity.

I'm Allison Nathan and this is Goldman Sachs exchanges. portfolio diversification between stocks and bonds that work for decades broke down

last year as surging inflation and rapid rate hikes hit bonds

and equities alike. But a new set of market stresses in recent months has seen

diversification benefits return. So are they here to stay to help explain the factors that investors

should keep in mind when building portfolios during times of market stress?

I'm sitting down with my colleague in Goldman Sachs research, Christian Miller

Glisman, who heads asset allocation research within portfolio strategy.

Christian, welcome back to the program.

Thanks for having me again, Addison.

So, Christian, there's a lot going on in the economy right now.

Maybe let's just start by getting your read on where we are

in the economic cycle and how that may broadly affect asset allocation strategies.

I think when we think about asset allocation there's always multiple overlapping cycles we need to look at and I think in the broad sense we have the structural cycle which are longer term themes and regime shifts that are going on, the business cycle,

which is essentially how much you're growing versus trend, the time spent between

recessions and the sentiment cycle.

And I think last year it was all about the structural cycle shifting after a decade

...