We are currently in the second-longest running bull market on record, and several market forces are already conspiring to fulfill the prophecy that bull markets typically die in euphoria, or are killed by a policy mistake. So, what does this mean for nonprofit fiduciaries?

2018 will be a year of two halves

In the first half of the year, we expect to see a continuation of the momentum in the markets, which has produced solid returns during the recovery. In the second half of the year, we may see markets begin to slow. Our models put the probability of recession in the next 12 months at around 25 percent, which is a new high for this ten-year economic expansion. It’s not time to be alarmed yet, but caution is advised given the age of the expansion. Overall, we think the U.S. economy is still on a path of moderate growth with low probability of recession over the next year. But, risks are building at the three-year horizon. We are recommending that you pursue strategies that balance longer term recession risks with shorter term opportunistic strategies. These shorter-term strategies could include moves such as increasing your allocation to assets like emerging market bonds, and reducing your allocation to assets such as growth-oriented global equity. Making these adjustments now can allow you to participate in the upside if markets continue to run, and can protect you on the downside if a sharp sell-off occurs.

Read the full article on market trends to watch for nonprofits by Martin Jaugietis at blog.boardsource.org.