Summary
We have three strategic asset-allocation models, targeting three risk-tolerance levels: Conservative, Growth, and Aggressive. We make regular tactical adjustments to the models, based on our outlooks for the various segments of the capital markets. Performance matters, and we monitor it closely. Through the first half of 2026, after an impressive rally in April-May, stocks are holding 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 goals. We are market-weight on large-cap stocks at this stage of the market cycle. We favor large-caps for growth exposure and financial strength, as well as exposure to the Information technology (IT) sector. Small- and mid-caps offer better valuation and recommended exposure to them is 15% of equity allocation. One of the market surprises in 2025 was the performance of global stocks, which turned in impressive results and have been solid so far in 2026. We expect the long-term trend favoring U.S. stocks to be re-established ultimately, given volatile global conditions. That said, international stocks still offer favorable near-term valuations, and we target 20% of equity exposure