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 forecasts for various sectors of the capital markets. This is a discussion of the growth portion of the models. December was a challenging month for investors, with the S&P 500 falling 2.4%, compared to a 2.3% decline for the fixed income ETF AGG. Over the entire year, stock returns were a healthy 25%, while bonds were down 2%. Our stock-bond benchmark model modestly favors bonds over stocks in a long-term portfolio setting. In other words, these asset classes should be close to their target weights in diversified portfolios, with a slight bias toward bonds, given the recent increase in interest rates. We’re overcrowding big companies. We prefer large-cap companies for exposure to growth and financial strength, while smaller companies provide value. Our recommended exposure to SMEs is 10%-15% of equity allocation, below the benchmark weighting. US stocks have outperformed global stocks over the past year and five years. We expect this trend to continue in favor of US stocks, given the volatile global economic, political, geopolitical and currency conditions. However, global equities offer favorable valuations in the near term and we target 5% to 10% of the group’s equity exposure. In terms of growth and value, growth rebounded in 2024, outpacing value. In the long term, we expect this growth