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

This market is likely to continue to climb a wall of worry as long as the Fed is easing.

Allocation Update

International Equities Monthly

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

Fund flow data indicate that foreign investors have been reallocating away from U.S. equities. Traditional headwinds such as currency volatility and expanding valuation discounts are easing and may even become tailwinds. With these pressures subsiding, we believe international markets are better positioned to compete with U.S. equities.

Allocation Update

Touchstone Asset Allocation Guidance

Touchstone Asset Allocation Committee

Looking into 2026, we see a moderately supportive policy backdrop, AI-driven productivity gains, and improving global growth, which should aid risk assets. However, valuation, concentration, and macro risks argue for a measured—not overtly risk-on—stance, with international equities likely delivering competitive though more moderate returns.

Allocation Update

Domestic Equity Monthly

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

We see a more evenly balanced market environment. However, with visibility limited and valuations stretched in parts of the market, our conviction levels remain low. We believe steady positioning and selectivity are warranted.

Allocation Update