Equity versus Fixed Income (Target = Middle)
We recommend a neutral position to equity and fixed income. We believe the bull market in stocks will continue, supported by economic expansion and rising corporate earnings. However, above-average valuations and policy uncertainties increase the risk of a short-term pullback.
Domestic Versus International (International target = High)
We maintain our overweight international allocation.Faster growth in the U.S. and sustained signs of a synchronized global rebound offer support for continued international outperformance. We expect domestic investments to deliver positive returns, but recommend a reduced allocation given economic challenges and domestic sector imbalances.
Asset Class Diversification:
Investing in equities involves risks. The values of your shares will fluctuate and you may lose principal. Special risks are inherent to international and emerging-markets investing, including those related to currency fluctuations and foreign political and economic events.