July 01, 2023

The LJE Allocation is a two-step process. First, our quantitative model estimates the probability that one asset class will outperform another. Second, we tilt the asset class benchmark allocation in direct proportion to the probability estimates. During 2023 the global market exposure benchmark has gained 7.46%, while the LJE Asset Allocation utilizing the ETFs appreciated 8.45%. Hence for the year the LJE allocation outperforms its benchmark by 99 basis points. Looking ahead to the third quarter. Looking ahead , our estimate of a 40% likelihood of bonds outperforming U.S. equities leads to a third quarter decrease in the portfolio’s fixed income exposure relative to the benchmark to 30.77% versus a 40% benchmark allocation. The equity allocation between domestic and international stocks is driven by the likelihood of foreign stocks outperforming domestic stocks. Collectively, we estimate the likelihood of international stocks outperforming the U.S. to be 49.35%. Thus, the model points to a slightly below neutral exposure to international equities this quarter. Overall, the process yields an allocation to foreign equities that increased to 34.17%, above its 30% benchmark allocation. Domestically, the small cap stocks are expected to outperform the mid and small cap stocks. This warrants an increase in exposure to large caps at the expense of mid and small caps. In turn the mid-cap stocks are expected to underperform the large-cap stocks warranting a reduced exposure to mid-cap stocks relative to the mid cap. The decreased allocation to fixed income, and the near neutral allocation between the domestic and international components of the portfolio yields an increase in exposure to the domestic stocks in the portfolio. The LJE strategy increases the allocation to domestic stocks to 35.07% relative to its 30% benchmark allocation. Overall, the equity allocation to domestic and international equities increases to 69.23% relative to a benchmark allocation of 60%.

You must have an active account to view these reports. You may register for a trial here

Download Complete Report in PDF Format

Download Complete Report in Word Format