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 segments of the capital markets. This is a discussion of the growth segment of the models. So far, equity investors have enjoyed 2024, with a year-to-date S&P 500 gain of about 27%. By comparison, the fixed-income benchmark ETF AGG has been flat. Our Stock-Bond Barometer model modestly favors stocks over bonds for the long term. As such, these asset classes should be near their target weights in diversified portfolios, with a slight tilt toward equities. We are over-weight on large-caps. We favor large-caps for growth exposure and financial strength, while small-caps offer value, despite the recent rally. Our recommended exposure to small- and mid-caps is 10%-15% of equity allocation, below the benchmark weighting. U.S. stocks have outperformed global stocks 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. That said, international stocks offer favorable near-term valuations, and we target 5%-10% of equity exposure to the group. In terms of growth and value, growth has rebounded in 2024, outperforming value as interest rates stabilized. Over the longer term, we anticipate that growth, led by the innovative IT sector, will t
