"Where should I invest?"

Asset allocation pieces have a grand and long-standing tradition in big banks.

They pop up at the beginning of each quarter and remind us about the most important investment decision we must make: portfolio allocation.

So here’s 6 profiles of portfolio allocation - each one with its own merits:

Cash is king: 100% in cash. T-Bills give you 5.4% yield. With inflation falling fast, that’s not a bad place to be.

Treasury Bug: 100% in 10Y Treasuries. The end of the hiking cycle is in sight AND it’s entirely possible we see rate cuts next year. Long bonds do well in this scenario, and give you 4% carry in the meantime. Treasury bugs will hold on to their USTs until they can buy the market at a much cheaper P/E.

Risk Parity: [60% in Treasuries] + [40% in your favourite stocks]. Risk Parity’s century-old track record is stellar, and long-term investors do well to trust it with their savings. In terms of what stocks to add, we’ll discuss it tomorrow but the whole market is your menu, from strong momentum in tech to deep value in other sectors.

To the Moon: [30% cash] + [70% of your favourite stocks]. Who said the bull market is over? Cassandras have been complaining about expensive stocks for months and yet here we are at SPX 4,500. Just keep some cash to buy the dips.

Going Nova: [80% in your favourite stocks] + [20% in crypto]. The way to long-term returns is long-term risk-taking. “No pain, no gain”, that’s the philosophy. You got to keep the pedal to the metal all.the.time. if you want oversized returns. 

The ‘Warren Buffet’: 200% in your low beta stocks. Buffet is not a value investor, he’s a low beta investor. He buys low-vol stocks on leverage, trusting the best US companies not to go bust. Worked well for him for a long time.