Chart of the week: The Ultimate Chart for Asset Allocators – The Property Chronicle
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Chart of the week: The Ultimate Chart for Asset Allocators

The Analyst

It’s a bit of a bold statement, but before we talk about why, let’s first of all go through what’s in it.  The black line is my composite valuation indicator for treasuries, and it’s showing them just over 2 standard deviations expensive.  The blue line is an equal weighted average of my valuation indicators for US equities, international equities, and commodities: as a group they’re showing up as over 0.5 standard deviations cheap.

Over the medium-to-longer term valuations have a major impact on expected returns, so if you’re running a multi-asset portfolio and you’re looking at a chart like this it provides some powerful guidance on allocations between growth vs defensive assets.

While there is a lot of uncertainty and dire data, from what I see there’s also a lot of factors that support the conclusion from this chart (i.e. overweight risk assets, underweight government bonds).  In the end it becomes a question of “what would you have to believe” in order to go against this chart?

The Analyst

About Callum Thomas

Callum Thomas

Callum is founder and head of research at Topdown Charts. Prior to starting the business he worked in multi-asset investment strategy at AMP Capital, AXA Global Investors, and the New Zealand Stock Exchange. Having spent his career in Australia and New Zealand he has by necessity developed a strong global focus, and sound capability in chart-driven top-down analysis for asset allocation.

Articles by Callum Thomas

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