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How would we divvy up the $1-million? We would overweight U.S. equities, marketweight foreign stocks and underweight bonds.
More specifically, we would allocate 40 per cent to U.S. large-cap issues, 6 per cent into mid-cap stocks and 4 per cent in small-caps. We would place 10 per cent in developed nations and 5 per cent in emerging markets.
Of the remaining 35 per cent fixed income and cash allocation, we recommend a 20 per cent holding in diversified intermediate-term U.S. debt, a 5 per cent stake in U.S. short-term debt, and a 10 per cent exposure to cash.
We think U.S. stocks have additional room to run before the year is out, due to: 1) encouraging historical precedents, 2) a projected recovery in global economic growth, aided by an expected troughing of European and emerging market GDP trends later this year, 3) improving U.S. EPS growth expectations and attractive valuations, and 4) favorable chart patterns.
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