Dynamic Asset Allocation: Global Strength Fuels Equity Leadership

Long-term trends show the rest of the world is leaving the US behind

Our global dynamic asset allocation model has moved to maximum overweight Stocks and maximum underweight Commodities. Not only has the ratio between stocks and commodities tilted in favor of stocks, but the long-term trend for stocks (ACWI) is higher, while the trend for commodities (CRB Index) is lower.

It has been nearly a decade since the model was last maximum overweight equities. Simply put, this is a function of commodities and bonds both being in long-term downtrends on an absolute basis and relative to stocks while the trend for stocks has turned higher.

The acute challenge for US investors is that the long-term trend for the US remains lower. With Canada now turning higher, the US is the only region in our framework for which the trend is still falling.

This leaves our equity model at a maximum underweight for US stocks for the first time since 2006.