Recent weeks have provided solid support for the broadly diversified, defensively oriented portfolios that we recommend.
Risk will not always be the primary consideration in asset allocation. Sooner or later valuations will once again be attractive (a p/e of 12?) and we will recommend more risk taking in portfolios where it is appropriate to the client.
Howver, US stock market valuations remain above their long-term mean and this combined with with US housing activity falling like a dropped knife, energy prices stubbornly high, escalating mid-east tension (when will Israel invade Lebanon?) and a consumer poised for a pull-back, it seems to us that defense continues to be the best posture.
Sentiment is unusally negative and that may trigger a fierce bear market rally but we do not expect it to last long or provide much return.
As always, we continue to look at our assumptions, trying to find information that would disprove our outlook. As of today that information has not materialized. We remain vigilant, however, willing to change our outlook, but for now steady in our asset allocation.
OSF
July 18, 2006
Risk will not always be the primary consideration in asset allocation. Sooner or later valuations will once again be attractive (a p/e of 12?) and we will recommend more risk taking in portfolios where it is appropriate to the client.
Howver, US stock market valuations remain above their long-term mean and this combined with with US housing activity falling like a dropped knife, energy prices stubbornly high, escalating mid-east tension (when will Israel invade Lebanon?) and a consumer poised for a pull-back, it seems to us that defense continues to be the best posture.
Sentiment is unusally negative and that may trigger a fierce bear market rally but we do not expect it to last long or provide much return.
As always, we continue to look at our assumptions, trying to find information that would disprove our outlook. As of today that information has not materialized. We remain vigilant, however, willing to change our outlook, but for now steady in our asset allocation.
OSF
July 18, 2006
