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,
