While the Fed is likely to cut interest rates further, we expect the focus to shift quickly to higher growth and more upward pressure on inflation. That means rising long-term interest rates and a turning point for investors who are still betting on falling long-term yields.

Investors seem to believe in a Goldilocks scenario — steady growth, easing inflation, and supportive liquidity. Yet, while markets brush aside concerns like the government shutdown and trade tensions, more fundamental risks are quietly building. Liquidity can change course abruptly, as last week’s sharp drop in precious metals reminded us. We adjust our tactical asset allocation to reflect a short-term bullish stance amid rapidly rising risks.

Strategic Asset Allocation (SAA) plays a crucial role in an investors’ decision-making process. This report features the quarterly update of three SAA models, their portfolio characteristics and the data we have used to construct the SAA models. In addition, we update the Expected Returns based on the return assumptions of approx. 70 asset managers and present tables with volatility and correlation data for every asset class.