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. Stocks got a good start from the gate in 2025, adding more than 2% in the first month. Bonds, meanwhile gave back less than 1%. Our Stock-Bond Barometer model modestly favors bonds over stocks for long-term portfolio positioning. We are over-weight on large-caps and 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. Although global stocks have taken an early performance lead in 2025, 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 has rebounded in 2023-2024 and has outperformed value as interest rates stabilized, tho