Paul Sweeting of J.P. Morgan Asset Management explains why radical changes of plan are an unwise reaction to market turbulence.
The economic drivers of equity returns also influence the credit component of corporate bond returns, and while the relationship is not linear, it is also not independent.
However, the drivers of real estate and commodities, for example, while related, do not necessarily operate in the same direction, so offer greater protection.
Other sources of return are available if we look further than reward for taking market risk.
For example, many asset classes, such as infrastructure, real estate and private equity, offer a reward for giving up liquidity.
If you invest in an asset that can take time and money to liquidate, then the cost of the asset will often be lower to compensate for this fact.
Since saving for a pension is a long-term activity where liquidity may not be needed for decades, pension arrangements are the ideal homes for illiquid investments such as infrastructure, real estate and private equity.
Another source of return is the premium available for taking on insurance risk. This might be through insurance-linked securities - investments issued by insurance companies to transfer insurance risks that they have previously taken on into the market - or more subtly through investments such as commodity futures.
Commodity futures are used by many counterparties as ways of hedging a risk that they face, such as the price received for growing a crop or mining a commodity.
As such, any investor willing to take the other side of a commodity future may earn an insurance-type premium for taking on this risk.
This is in addition to any return seen from the movement in the underlying price of commodities.
From this it should be clear that there are steps that can be taken to make portfolios more resilient against market falls; however, the key message in the face of current events is not to make any rash investment choices and to concentrate on the strategic decisions needed to meet investment goals.
Please be aware that this material is produced for information purposes only and should not be taken as or construed as a recommendation or advice.
The opinions and views expressed here are those held by J. P. Morgan Asset Management at the time of publication, which are subject to change.
J.P. Morgan Asset Management Marketing Limited accepts no legal responsibility or liability for any matter or opinion expressed in this material.
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Paul Sweeting is the European head of J.P. Morgan Asset Management's strategy group
