Allocation Update

Find timely intelligence to inform your portfolio positioning right now. Touchstone conducts deep dive analyses of specific asset classes and offers asset allocation guidance using different approaches that are designed to add value for financial professionals and their clients. While certainly not exhaustive, these fresh perspectives include not only historically significant findings, but they also incorporate more recent trends or ideas about important market or economic environments - the culmination of which can serve as a solid framework for discussion and consideration.

Fixed Income Monthly

Crit Thomas, CFA, CAIA, Erik M. Aarts, CIMA, Tim Paulin, CFA

High-Quality Bias: We remain tactically overweight investment-grade bonds, attracted by compelling yields and lower economic sensitivity. Despite returning more than 7% over the past year, investment-grade credit still yields at or above the 70th percentile looking at the past decade—leaving room for further solid returns. Longer-term, high-quality municipal bonds also look appealing. Having lagged taxable sectors this year, they offer relative safety, supported by state fiscal discipline and record “rainy day” reserves that help buffer against near-term downturns.

Allocation Update

Asset Allocation Chart of the Month

Crit Thomas, CFA, CAIA, Erik M. Aarts, CIMA, Tim Paulin, CFA

The outlook for 2026 is shaped by both positive and negative forces moving in parallel. Some of these opposing dynamics will likely persist; the key question is whether their net effect proves supportive or challenging for risk assets. For now, we lean modestly bullish, while remaining alert to shifts that could alter this balance. With this piece, we focus on the potential positives.

Allocation Update

International Equities Monthly

Crit Thomas, CFA, CAIA, Erik M. Aarts, CIMA, Tim Paulin, CFA

Past headwinds to international investing, such as currency volatility and expanding valuation discounts, are easing and may even become tailwinds. As these pressures subside, emerging and developed international markets are better positioned to compete with U.S. equities, with earnings and dividends expected to be the primary drivers of returns.

Allocation Update

Touchstone Asset Allocation Guidance

Touchstone Asset Allocation Committee

The outlook for 2026 is being shaped by crosscurrents that are likely to persist. The key question is whether their net effect ends up supporting or pressuring risk assets. For now, we lean modestly bullish but remain at our neutral strategic stock/bond weighting. We are alert to shifts that could change the balance.

Allocation Update

Domestic Equity Monthly

Crit Thomas, CFA, CAIA, Erik M. Aarts, CIMA, Tim Paulin, CFA

The 3Q earnings season has been one of the strongest seen in years, with widespread beats on both revenue and earnings. Yet, stock reactions have been muted. Part of this likely reflects the strong rally that preceded earnings, but investors may also be shifting their focus toward 2026, introducing some added uncertainty. In addition, some are beginning to reassess the AI narrative. We view this as a healthy development, not a cause for concern.

Allocation Update