Strategic Asset-Allocation Models and Market Outlook
Summary
We have three strategic asset-allocation models, based on risk-tolerance: Conservative, Growth, and Aggressive. We make tactical adjustments to the models based on our outlooks for the various segments of the capital markets. In the wake of the Trump tariff announcements, stocks are rapidly approaching bear-market status. Bonds, meanwhile, are up 2% year to date as investors rotate toward less-risky securities. Our Stock-Bond Barometer modestly favors bonds over stocks for long-term portfolio positioning. As such, these asset classes should be near their target weights in diversified portfolios, with a slight tilt toward bonds. We are over-weight large-caps at this stage of the market cycle based on growth exposure and financial strength, amidst volatility. Our recommended exposure to small- and mid-caps is 10%-15% of equity allocation, below the benchmark weighting. Global stocks have taken an early performance lead in 2025, although U.S. stocks have outperformed global peers over the trailing one and five years. We expect this trend favoring U.S. stocks to continue, given volatile global economic, political, geopolitical, and currency conditions. Still, international stocks offer favorable near-term valuations, and we now target 10%-20% of equity exposure to the group. In terms of growth and value,
Strategic Asset Allocation and Market Trends
Investors are constantly faced with the challenge of making strategic asset-allocation decisions based on their risk tolerance. Our firm offers three models – Conservative, Growth, and Aggressive – to help guide clients in their investment choices. These models are continuously adjusted based on our market outlook and analysis of different segments of the capital markets.
Recent developments, such as the Trump tariff announcements, have significantly impacted market conditions. Stocks are now on the brink of entering bear-market territory, prompting investors to seek refuge in less-risky assets like bonds. Bonds have seen a 2% increase year to date, signaling a shift towards safer securities.
Our Stock-Bond Barometer currently leans towards bonds over stocks for long-term portfolio positioning. This suggests that investors should maintain their target weights in diversified portfolios, with a slight preference towards bonds. In the current market environment, we are overweight large-cap stocks due to their growth potential and financial stability amidst market volatility.
When it comes to small- and mid-cap stocks, we recommend a slightly lower allocation of 10%-15% of equity exposure compared to the benchmark weighting. While global stocks have shown early performance success in 2025, U.S. stocks have consistently outperformed their global counterparts over the past one and five years. Despite this, international stocks present attractive valuations in the near term, leading us to target a 10%-20% equity exposure to this asset class.
In conclusion, our strategic asset-allocation models and market outlook emphasize the importance of diversification and risk management in building a resilient investment portfolio. By carefully analyzing market trends and adjusting our allocations accordingly, we aim to help investors navigate the ever-changing landscape of the financial markets.
