Summary
We have three strategic asset-allocation models, targeting risk-tolerance: Conservative, Growth, and Aggressive. We make tactical adjustments to the models, based on our outlooks for various segments of the capital markets. Performance matters and we monitor it closely. After an impressive rally in April-May, stocks have taken the performance lead over bonds. From an asset-allocation standpoint, our Stock-Bond Barometer model still sees both asset classes near fair value, so portfolio weights ultimately will depend on strategic factors. We are market-weight on large-cap stocks at this stage of the market cycle, favoring them for growth exposure and financial strength, as well as exposure to the Information Technology sector. Meanwhile, small- and mid-caps offer better valuation and our recommended exposure to them is 15% of equity allocation, in line with the benchmark weighting. One of the market surprises in 2025 was the performance of global stocks, which turned in impressive results. We expect the long-term trend favoring U.S. stocks to be re-established ultimately, given volatile global economic, political, geopolitical, and currency conditions. That said, international stocks still offer favorable near-term valuations, and we target an increased 20% of eq