Advisor Resources
Easing Inflation Fears
When inflation is rising, pundits are predicting a recession, and clients are anxious, you want to have productive conversations that help them cope.
Get big-picture market insights, behavior-based conversation starters, and portfolio builders to help you do it.
Big Picture
Economic Outlook: What’s Ahead for the U.S. Economy?
Our investment professionals see three possible scenarios ahead for the economy—recession, stagflation and a goldilocks outcome. Here’s their take on which is most likely, plus steps investors can take to prepare for each one.
Our View: Recession Has Overtaken Stagflation
Inflation-spurred, tightened financial conditions will take a toll on consumer spending and corporate sentiment. These factors make recession the most likely economic outcome within the next few quarters.
As recession sets in, Treasury yields likely will fall. We expect credit spreads to widen more significantly than in a stagflation scenario.
Investment adjustments worth considering:
Keep credit quality high.
Focus less on equity style because the distinctions tend to mean less in recessions.
Look to sustainable growth for stock investments.
Select quality stocks—and vehicles that invest in them.
Watch for the possibility that commodities lose their appeal.
Limit exposure to real estate stocks.
Our View: Stagflation Is Still a Possibility
Our analysis suggests the probability for stagflation has slipped. We expect stagflation to push the 10-year Treasury yield higher amid significant volatility as slow growth and high inflation collide. We also believe the two-year Treasury yield may increase as the Fed continues to tighten. Meanwhile, credit spreads, particularly in the high-yield sector, will potentially widen amid weak economic growth.
Investment adjustments worth considering:
Maintain inflation protection.
Focus on quality credit instruments.
Focus on traditional value sectors and favor quality stocks.
Consider commodities—but be cautious, as geopolitics and the pandemic’s ongoing effects could heavily influence performance.
Limit exposure to real estate.
Our View: Goldilocks’ Conditions Are More Longed-For Than Reality
We believe a “goldilocks” scenario of a soft economic landing, in which inflation rapidly slows and the Fed pivots from restrictive policy, is highly unlikely. However, if inflation moderates and the Fed ends its rate-hike campaign, Treasury market volatility likely will subside. Additionally, we expect Treasury yields and mortgage rates would decline and credit spreads tighten.
Investment adjustments worth considering:
Take a look at higher-risk bonds, particularly high-yield bonds and bank loans, which historically have benefited during economic expansions.
Be nimble—and explore an active approach—when it comes to duration management.
Maintain inflation-protection strategies.
Consider growth stocks and cyclical stocks, which tend to outperform in this environment.
Catch Up On Inflation Insights
Conversation Starters
Understanding Investor Biases
Inflation Fears Can Bring Out Biases
A few biases often come to the fore during economic stresses such as high inflation.
“Having awareness of biases, such as overconfidence, loss aversion, or recency bias can help people make really good choices.”
Cass Sunstein, Professor, Harvard University
Certain goals can trigger common biases.
Get Behavioral Tips by Investor Goal
Share These Education Resources With Clients
Common Behavior: Loss Aversion
“If we are myopically focused on losses over the importance of gains, we might make decisions that cause terrible economic problems.”
Cass Sunstein, Professor, Harvard University
To help cope with loss aversion, Professor Sunstein suggests these actions:
Offer comparative judgments to help clients understand the risk trade-offs of various investment classes, including cash.
Frame your questions to give people a sense of the long term rather than the short. Seeing short-term risks can scare people away. Conversely, seeing long-term patterns can be calming.
Behavioral content Cass Sunstein ©2022 All Rights Reserved
Share These Education Resources With Clients
Common Behavior: Availability (Recency Bias)
“If you're focused on income, you might be thinking too much about recent events—what's available to your mind.”
Cass Sunstein, Professor, Harvard University
To help cope with availability bias, Professor Sunstein suggests this action:
Ask how often these clients check their investment performance. Data show that many investors check their portfolios a lot when things are going not so well and not so much when things are going well.
Behavioral content Cass Sunstein ©2022 All Rights Reserved
Share These Education Resources With Clients
Common Behavior: Overconfidence and Action Bias
“People who are focused on growth sometimes aren’t thinking enough about the long term.”
Cass Sunstein, Professor, Harvard University
To help see how growth-oriented your client really is, Professor Sunstein suggests this action:
Ask your client, “How do you feel if it turns out that you have a really good 18 months, but in that three-month period, things don't go so well?” Many people find out they’re not as growth minded as they believed themselves to be when faced with market losses or high inflation.
Behavioral content Cass Sunstein ©2022 All Rights Reserved
Put Behavioral Insights to Work for Clients
Apply Decision Hygiene
Explore Thinking "Systems"
Explain Why a Precommitment Plan
Behavioral content Cass Sunstein ©2023 All Rights Reserved
Portfolio Builders
Explore By Investor Goal
Consider Adding TIPS
As inflation rises, so do Treasury inflation-protected securities’ (TIPS) face values. That’s why TIPS have the potential to generate an income stream that outpaces inflation.
Shifting 25% of a core bond portfolio to TIPS creates the opportunity for:
Better performance in a rising interest rate period.
A risk level that stays steady with that of a core bond portfolio.
See It in Action
The sample allocation illustrated in the graphic shows that, over the past five years, a 75/25 blended portfolio using Short Duration Inflation Protection Bond Fund:
Improved performance an average of 0.66% per year.
Reduced risk by 12%.
Sample allocation.
View Supporting Data
All data as of 9/30/2022.
Data reflects past performance, assumes reinvestment of dividends and capital gains and is no guarantee of future results. Current performance may be higher or lower than data shown. Investment return and principal value fluctuate. Redemption value may be more or less than original cost. iew fund performance data as of the most recent month-end: American Century Short-Duration Inflation Protected Bond Fund. Core Bonds representative data is presented quarterly.
For additional information, consult the prospectus.
Glossary Terms: Bloomberg U.S. Treasury Inflation Protected Securities (TIPS) Index, Standard Deviation
*The Core Bond investment category is represented by iShares Core US Aggregate Bond ETF (AGG). It is not intended to represent a specific investment. Following are daily closing prices as of the dates specified: 9/30/2012: $112.45; 9/30/2017: $109.59; 9/30/2019: $113.12; 9/30/2021:$114.83.
A**: Seeks to provide total return and inflation protection consistent with investment in inflation-indexed securities.
B***: Tracks the investment results of an index composed of the total U.S. investment-grade bond market.
All funds and ETFs: Provide daily liquidity. Principal is not guaranteed.
Additional Investments to Consider
To see fund ratings for all time periods, visit each fund's profile through the individual links below.
Name | Ticker | Overall Rating | # of Funds in Category |
TWUSX | ★★★★ Among 79 funds in the Short Government category | |
ACSNX | ★★★★ Among 544 funds in the US Fund Short-Term Bond category |
As of 9/30/2022. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance, placing more emphasis on downward variations and rewarding consistent performance.
More About Morningstar
The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10- year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Consider Short-Duration Investments
Complement core bond holdings with short-duration investments to add flexibility as interest rates rise to combat inflation.
Shifting 25% of a core bond allocation to short-duration investments creates the opportunity for:
Increased income.
Lower interest-rate sensitivity.
See It in Action
The sample allocation illustrated in the graphic shows that, over the past 10 years, a 75/25 blended portfolio using Short Duration Strategic Income Fund:
Increased income by 7%.
Reduced interest-rate sensitivity by 17%.
Sample allocation.
View Supporting Data
All data as of 9/30/2022.
Data reflects past performance, assumes reinvestment of dividends and capital gains and is no guarantee of future results. Current performance may be higher or lower than data shown. Investment return and principal value fluctuate. Redemption value may be more or less than original cost. View fund performance data as of the most recent month-end: American Century Short-Duration Strategic Income Fund. Core Bonds representative data is presented quarterly.
For additional information, consult the prospectus.
Glossary Terms: Bloomberg U.S. 1-3 Year Government/Credit Bond Index, Average Effective Duration, 12 Month Yield, 30 Day SEC Yield
*The Core Bond investment category is represented by iShares Core US Aggregate Bond ETF (AGG). It is not intended to represent a specific investment. Following are daily closing prices as of the dates specified: 9/30/2012: $112.45; 9/30/2017: $109.59; 9/30/2019: $113.12; 9/30/2021:$114.83.
A**: Seeks income and, as a secondary objective, seeks long-term capital appreciation.
B***: Tracks the investment results of an index composed of the total U.S. investment-grade bond market.
All funds and ETFs: Provide daily liquidity. Principal is not guaranteed.
Additional Investments to Consider
To see fund ratings for all time periods, visit each fund's profile through the individual links below.
Name | Ticker | Overall Rating | # of Funds in Category |
KORP | ★★★★★ Among 187 funds in the US Fund Corporate Bond category | |
ASIEX | ★★★★ Among 284 funds in the US Fund Multisector Bond category | |
BCHYX | ★★★★ Among 102 funds in the US Fund Muni California Long category | |
BCITX | ★★★★ Among 61 funds in the US Fund Muni California Intermediate category | |
ABHYX | ★★★★ Among 190 funds in the US Fund High Yield Muni category | |
TWTIX | ★★★★ Among 277 funds in the US Fund Muni National Intermediate category |
As of 9/30/2022. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance, placing more emphasis on downward variations and rewarding consistent performance.
More About Morningstar
The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10- year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Consider Investments Focused on Accelerated Earnings
The faster a company’s earnings accelerate, the more likely its stock will outperform the relevant benchmark over a one- to three-year horizon, American Century Investments research has found.
See It in Action
The sample allocation illustrated in the graphic shows that, over a 10-year period, an 80/20 mix of a global equity blended portfolio and a fund focused on accelerated earnings growth, such as American Century Ultra{sup}®{/sup} Fund:
Increased return by over 11% with a modest rise in risk.
Delivered more than 78% outperformance against inflation (measured by Consumer Price Index (CPI)).
Sample allocation.
View Supporting Data
Performance and statistics are as of 9/30/2022.
Data reflects past performance, assumes reinvestment of dividends and capital gains and is no guarantee of future results. Current performance may be higher or lower than data shown. Investment return and principal value fluctuate. Redemption value may be more or less than original cost. View fund performance data as of the most recent month-end: American Century Ultra® Fund. Global Equity Blended Portfolio representative data is presented quarterly.
*Returns are based on 10-year annualized returns and risk (measured by standard deviation).
For additional information, consult the prospectus.
Glossary: Bloomberg US Aggregate Bond Index, Consumer Price Index (CPI), MSCI World Index, Russell 1000 Growth Index, Standard Deviation
**Global Equity Blended Portfolio is comprised of 90% MSCI World Index, 10% Bloomberg US Aggregate Bond Index
Source: MSCI. Morgan Stanley Capital International (MSCI) makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used to create indices or financial products. This report is not approved or produced by MSCI. Source: Bloomberg Index Services Ltd
Additional Investments to Consider
To see fund ratings for all time periods, visit each fund's profile through the individual links below.
Name | Ticker | Overall Rating | # of Funds in Category |
ACMVX | ★★★★★ Among 391 funds in the US Fund Mid-Cap Value category | |
BIGRX | ★★★★ Among 1,153 funds in the US Fund Large Value category | |
AVUV | ★★★★ Among 443 funds in the US Fund Small Cap Value category | |
ACFOX | ★★★★ Among 1,142 funds in the US Fund Large Growth category | |
American Century Quality Diversified International Equity ETF | QINT | ★★★★ Among 701 funds in the US Fund Foreign Large Blend category |
As of 9/30/2022. For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance, placing more emphasis on downward variations and rewarding consistent performance.
More About Morningstar
The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10- year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
Advisors, We’re Here to Help
Let’s discuss your clients’ specific needs.
General Disclosures
There is no guarantee that the investment objectives will be met.
Diversification does not assure a profit nor does it protect against loss of principal.
The information is not intended as a personalized recommendation or fiduciary advice and should not be relied upon for, investment, accounting, legal or tax advice.
This information is for educational purposes only and is not intended as investment or tax advice.
The value and/or returns of a portfolio will fluctuate with market and economic conditions.
Investments in fixed income securities are subject to the risks associated with debt securities including credit, price and interest rate risk.
Generally, as interest rates rise, the value of the securities held in the fund will decline. The opposite is true when interest rates decline.
In addition, the lower-rated debt securities in which the fund invests are subject to greater credit risk and liquidity risk. Credit risk is the risk that an obligation won’t be paid and a loss will result. Liquidity risk is the risk that the fund will have difficulty selling its debt securities. There is no guarantee that the investment objectives will be met. Dividends and yields represent past performance and there is no guarantee that they will continue to be paid.
Exchange Traded Funds (ETFs) are bought and sold through exchange trading at market price (not NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.
Fixed Income Disclosures
The value and/or returns of a portfolio will fluctuate with market and economic conditions.
Investments in fixed income securities are subject to the risks associated with debt securities including credit, price and interest rate risk.
Generally, as interest rates rise, the value of the securities held in the fund will decline. The opposite is true when interest rates decline.
The lower rated securities in which the fund invests are subject to greater credit risk, default risk and liquidity risk.
Credit risk is the risk that an obligation won't be paid and a loss will result. Generally, a lower credit rating indicates a greater risk of non-payment. Liquidity risk is the risk that the fund will have difficulty selling its debt securities.
Short Duration Inflation Protection Bond Fund
In certain interest rate environments, such as when real interest rates are rising faster than nominal interest rates, inflation-protected securities with similar durations may experience greater losses than other fixed income securities. Interest payments on inflation-protected debt securities will fluctuate as the principal and/or interest is adjusted for inflation and can be unpredictable.
iShares Core US Aggregate Bond ETF (AGG)
ETFs are baskets of securities that trade like stocks on an exchange and can be bought or sold throughout the trading day at fluctuating market prices (not NAV). Shares may trade at a premium or discount to NAV in the secondary market. Brokerage commissions will reduce returns. Like mutual funds, ETFs also have expense ratios. In general, actively managed ETFs cost more than passively managed index ETFs. Unlike mutual funds, it is possible to buy ETFs on margin and sell them short. ETFs held in a taxable account may result in less tax liabilities than similarly invested mutual fund the same account. Different companies offer ETFs. iShares are distributed by BlackRock Investments, LLC (together with its affiliates, BlackRock). All rights reserved. iShares and BLACKROCK are registered trademarks of BlackRock.
Ultra Fund
The fund is subject to potentially greater short-term price volatility than that associated with an average stock fund.
Avantis U.S. Small Cap Value ETF
Morningstar Rating - Investor Class
Morningstar Category - US Fund Small Value | Overall | 3 Year | 5 Year | 10 Year |
|---|---|---|---|---|
Ratings |
|
| - | - |
# of Funds | 443 | 443 | - | - |
ALL DATA AS OF 9/30/2022. SOURCE: MORNINGSTAR.
For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance, placing more emphasis on downward variations and rewarding consistent performance.
Exchange Traded Funds (ETFs): Foreside Fund Services, LLC - Distributor, not affiliated with American Century Investments Services, Inc.
Mutual Funds: American Century Investment Services, Inc., Distributor.