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. This is a discussion of the Growth segment of the models. December was challenging for investors, as the S&P 500 declined 2.4%, compared to a 2.3% decline for the fixed-income benchmark ETF AGG. For the full year, equity returns were a healthy 25%, while bonds were down 2%. Our Stock-Bond Barometer model modestly favors bonds over stocks for long-term portfolio positioning. In other words, these asset classes should be near their target weights in diversified portfolios, with a slight tilt toward bonds, given the recent increase in interest rates. We are over-weight on large-caps. We favor large-caps for growth exposure and financial strength, while small-caps offer value. 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. Still, 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 rebounded in 2024, outperforming value. Over the longer term, we anticipate that growt
