"Third Quarter 2021 Asset Allocation Outlook
There is no recession within our forecast period. Monetary and fiscal stimulus should continue in the U.S. over our three-year forecast period, yet at a decreasing rate as the economy recovers.
After a surge in inflation this year and into next year, resulting from the economic recovery following the pandemic, inflation should settle within the Fed’s threshold.
The ECB remains aggressively accommodative and is supported by the EU’s fiscal stimulus, which should help to hasten the pace of their economic recovery.
Equity allocations among all strategies remain elevated with the retention of a heavy tilt toward value and, where risk appropriate, an overweight to small capitalization stocks.
The high allocation to international stocks remains intact given our expectations of overseas growth.
In the more risk-tolerant strategies where emerging market exposure is employed, mainland Chinese stocks are either vastly underweighted or excluded.
Commodity exposure is retained, with heavier concentration in the more risk-averse strategies, for the advantages they afford during heightened geopolitical risk."
(Asset Allocation Quarterly Third Quarter 2021 07/21/2021 by The Asset Allocation Committee of Confluence Investment Management LLC)