Summary
We have three strategic asset-allocation models based on risk-tolerance: Conservative, Moderate, and Aggressive. We make tactical adjustments to the models, based on our outlooks for the capital markets. April was a difficult month for investors, as the S&P 500 declined 4.1% and the fixed-income benchmark ETF AGG fell 2.8%. From an asset-allocation standpoint, our Stock-Bond Barometer model slightly favors bonds over stocks for long-term portfolios. But drilling down into stocks, we are now over-weight on large-caps. We favor large-caps for growth exposure and financial strength, while small-caps are selling at historical discounts relative to large-caps and offer value. Moving to the international arena, U.S. stocks have outperformed global stocks over the trailing one- and five-year periods (emerging markets stocks did well in April), and we expect this trend to continue, given the U.S. market’s embrace of the innovative Tech sector. In terms of growth versus value, we anticipate that growth, led by the Tech, Consumer, and Healthcare sectors, will again top returns from value, led by Energy, Real Estate, and Materials, due to favorable secular and demographic trends. As for the fixed-income segment of a portfolio, we break bonds down into four areas: C
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