Mid-Year Portfolio Review: Adjusting for Changing Conditions

Mid-year portfolio reviews provide an opportunity to assess performance, evaluate changing market conditions, and adjust positioning for the remainder of the year. This disciplined approach ensures portfolios remain aligned with investment objectives and risk tolerance.

Performance Attribution Analysis

Effective portfolio reviews begin with performance attribution. Which positions contributed to returns? Which detracted? Understanding attribution helps identify whether performance came from good stock selection or simply from market movements.

If your outperformance came from being overweight a sector that outperformed, that's not skill—that's luck. If your outperformance came from selecting better companies within a sector, that's skill worth replicating.

Macro Reassessment

Mid-year reviews should include reassessment of macro assumptions. Have interest rate expectations changed? Has inflation evolved differently than expected? Have geopolitical risks shifted? These changes should inform portfolio adjustments.

For example, if interest rate expectations have declined significantly, bond allocations might warrant adjustment. If inflation has moderated more than expected, commodity hedges might warrant reduction.

Rebalancing Discipline

Portfolios drift from target allocations as different assets perform differently. A portfolio that started 60% equities and 40% bonds might have drifted to 65% equities and 35% bonds after strong equity performance. Rebalancing back to 60/40 forces you to sell winners and buy losers—exactly what disciplined investors should do.

Tax Efficiency Considerations

Rebalancing should consider tax implications. Selling winners in taxable accounts creates tax liability. Strategic rebalancing might involve directing new contributions to underweighted positions rather than selling winners.

Looking Forward

Mid-year reviews should conclude with clear positioning for H2. What are your key macro views? How is your portfolio positioned to benefit from your views while protecting against downside risks? This forward-looking perspective ensures disciplined portfolio management throughout the year.