Summary

We have three strategic asset-allocation models, based on risk-tolerance levels: Conservative, Growth, and Aggressive. We make tactical adjustments to the models on a regular basis, based on our outlooks for the various segments of the capital markets. In terms of performance through May, stocks and bonds are neck-and-neck, both with sub-par returns of 1% year to date. Looking ahead from an asset-allocation standpoint, our Stock-Bond Barometer model still slightly 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. We are over-weight on large-caps at this stage of the market cycle. We favor large-caps for growth exposure and financial strength, amidst volatility. Our recommended exposure to small- and mid-caps is 10% of equity allocation, below the benchmark weighting. Global stocks have taken an early performance lead in 2025, although U.S. stocks have outperformed their global peers over the trailing one- and five-year periods. We expect the long-term trend favoring U.S. stocks to re-emerge, given volatile global economic, political, geopolitical, and currency conditions. That said, i