Model portfolios in market uncertainty
Q2 2024 market commentary and model portfolio asset allocation
Samir Mathur
Chair of the Portfolio Solutions Committee
Mario DiVito
Multi-asset investment director
Stanley Moy
Multi-asset investment specialist
Key takeaways for the quarter ended June 30, 2024
- Model portfolio asset allocation remains focused on long-term goals amid uncertainty about elections and the timing of interest rate cuts.
- The Portfolio Solutions Committee and Capital Solutions Group adjusted strategic asset allocations over the quarter, driven by ongoing research and updated long-term return expectations.
- Recent strategic changes reflect longer-term opportunities in dividend payers outside the U.S. as well as higher income areas such as emerging markets debt.
Market review
Markets pulled back from robust gains earlier in the year but nonetheless ended the quarter higher. The S&P 500 Index rose 4% for the quarter ended June 30, 2024, taking year-to-date gains to 15%. Information technology stocks continued to climb, posting double-digit gains. But U.S. equity sectors showed greater dispersion across the board. Growth stocks led value, with the Russell 1000 Growth Index gaining 8% versus a 2% decline for the Russell 1000 Value Index. Small-cap stocks lagged the broader S&P 500 by a wide margin; the Russell 2000 Index fell 3% for the quarter and ended 2% higher year to date. The MSCI All Country World Index (ACWI) ex USA rose 1%, though the MSCI Emerging Markets Index climbed 5%.
The Bloomberg U.S. Aggregate Index ended the quarter nearly flat, while the Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index rose 1%. The U.S. Federal Reserve tempered its forecast for rate cuts in 2024 amid signs of a resilient job market and concerns about inflation.
Quarterly model results
Growth portfolios
Growth models had positive absolute results but trailed their benchmarks, largely driven by negative selection in U.S. information technology and limited exposure to the sector, particularly given the highly concentrated S&P 500. But non-U.S. selection in information technology and health care were bright spots across all three models. (All comments about model composite returns versus the benchmark are true on a gross and net-of-fees basis, unless otherwise noted.)
American Funds Global Growth Model Portfolio
- U.S. equity selection hampered relative results.
- Overall, for total equity sector contribution, selection in information technology and industrials hurt while health care was positive. But non-U.S. selection in information technology helped.
- SMALLCAP World Fund® and EuroPacific Growth Fund® were among the weaker underlying funds on a relative basis, while The Growth Fund of America® and New Economy Fund® helped.
American Funds Growth Model Portfolio
- U.S. equity selection detracted. Positive selection in communication services and health care partially offset negative selection in information technology and consumer discretionary.
- Positive selection in non-U.S. equities, especially within information technology, health care and materials, helped.
- New Economy Fund and The Growth Fund of America were strong relative contributors as was Investment Company of America® — a new addition to the portfolio. SMALLCAP World Fund was a relative drag.
American Funds Moderate Growth Model Portfolio
- U.S. and non-U.S. equity selection were negative.
- Positive selection in health care and communication services along with sector allocation in financials and real estate were offset by selection in information technology.
- SMALLCAP World Fund hurt on a relative basis while The Growth Fund of America helped.
Growth-and-income portfolios
Growth-and-income model portfolios lagged given their focus on higher dividend payers in a growth equity-led market. While U.S. information technology selection and exposure hampered relative results for these model portfolios, non-U.S. selection in information technology, health care and materials were positives for the quarter. We assess growth-and-income portfolios using metrics like volatility and risk-adjusted return to measure success over the long term.
American Funds Growth and Income Model Portfolio
- Despite positive absolute returns, this portfolio lagged its benchmark due to negative U.S. equity selection.
- For total equity sector contribution, selection in information technology and financials detracted from relative results. Industrials supported results.
- The Growth Fund of America and The Investment Company of America had stronger relative returns whereas SMALLCAP World Fund was weaker.
American Funds Moderate Growth and Income Model Portfolio
- Absolute results were positive but U.S. equity selection hurt relative returns.
- Not having as much exposure to the U.S. information technology sector hampered relative results, as did negative selection in consumer discretionary, financials and energy. Selection in U.S. industrials helped.
- Selection in securitized debt, Treasuries and emerging markets debt weighed on fixed income results but corporates helped.
- New Perspective Fund helped on a relative basis while SMALLCAP World Fund hurt. American Funds Multi-Sector Income Fund was a strong relative fixed income contributor.
American Funds Conservative Growth and Income Model Portfolio
- U.S. equity selection hurt relative returns, particularly health care and communication services.
- While a less-than-benchmark exposure to communication services and information technology was a drag this quarter, this model remains focused on income and dividend payers given its long-term objectives. Investments in U.S. industrials were a bright spot for the quarter.
- Washington Mutual Investors Fund and Capital World Growth and Income Fund® were the strongest contributors on a relative basis. American Funds Multi-Sector Income and American Funds High Income Trust Fund® supported relative fixed income returns while a new allocation to Emerging Markets Bond Fund detracted.
American Funds Conservative Income and Growth Model Portfolio
- Selection in health care, consumer discretionary and communication services hurt on a relative basis as did more limited allocations to information technology.
- Positive selection in corporates and high yield outweighed negative selection in emerging markets bonds, Treasuries and securitized debt.
Preservation and income portfolios
Both portfolios lagged their benchmarks for the quarter. We assess these portfolios using metrics such as yield and volatility to measure success over the long term.
American Funds Conservative Income Model Portfolio
- U.S. equity selection hurt, particularly in information technology, health care and consumer discretionary.
- Selection in fixed income helped, especially securitized debt and corporates.
American Funds Preservation Model Portfolio
- Selection in U.S. Treasuries weighed on relative results.
- Choice of securities in corporates and securitized debt was positive.
Retirement income models
American Funds Retirement Income models had positive absolute returns. Gross returns for Enhanced outpaced the benchmark but net returns lagged. Moderate and Conservative lagged their benchmark on a gross and net basis.
- Greater relative equity exposure helped in all three models. Given their income objectives, these models’ focus on dividend-paying equities weighed on relative results; Income Fund of America® is concentrated in higher yielding dividend payers.
- Exposure to utilities across all models boosted returns while greater exposure to industrials and consumer staples hurt.
- Within fixed income, less exposure to inflation-linked bonds hampered returns while high yield bond exposure helped. American Funds Multi-Sector Income aided relative fixed income returns.
Tax-aware model portfolios
- Tax-Aware Moderate Growth Model Portfolio trailed its benchmark, hurt by U.S. and non-U.S. equity selection.
- Growth-and-income portfolios lagged. Negative stock selection was partially offset by positive selection in general obligation and special tax municipal bonds in all three model portfolios, with education and health care municipal bonds strong positives in the Tax-Aware Growth & Income and Tax-Aware Moderate Growth & Income portfolios.
- The Conservative Income and Tax-Exempt Preservation model portfolios outpaced their benchmarks on a gross basis, but net returns lagged. Strong security selection in municipal fixed income helped.
What's new in growth and growth & income portfolios
Capital Solutions Group strategic enhancements as of May 23, 2024
- Introduced an allocation to American Funds Global Insight Fund in the Global Growth and Moderate Growth portfolios
- Added The Investment Company of America to the Growth portfolio
- Introduced American Funds Global Insight Fund to the Growth and Income portfolio
- Introduced an allocation to American Funds Emerging Markets Bond Fund in the Conservative Growth & Income and Conservative Income & Growth portfolios
What’s new in retirement income portfolios
Capital Solutions Group strategic enhancements as of April 25, 2024
- Added Capital Income Builder across the retirement income portfolios
- Removed exposure to American Funds Inflation-Linked Bond Fund in the enhanced and moderate portfolios
- Increased withdrawal rate ranges across retirement income portfolios
Q&A with Samir Mathur
What are the recent strategic allocation changes?
International equities, including emerging markets equity, are one area of longer term opportunity, according to our recent capital market assumptions (CMAs). CMAs are longer-term 20-year return and risk expectations.
In growth model portfolios, we broadened exposure to a more diversified range of companies across regions and sectors. American Funds Global Insight Fund can offer global flexibility and has had an attractive risk/return profile over the last decade. This fund also has had a low holdings overlap with other funds in the model portfolios where it has been added. Despite being a growth fund, American Funds Global Insight Fund has not historically been more volatile than Capital World Growth and Income Fund.
In the Growth portfolio, the addition of The Investment Company of America should complement Fundamental Investors, given that the former has moved closer to a core fund over time than value.
In fixed income, the recently updated CMAs project that higher income areas such as emerging markets debt are likely to provide relatively strong long-term returns. The emerging markets debt universe has matured over the years and can offer somewhat lower correlations to equities than U.S. high yield debt. The new emerging markets debt allocation in growth and income portfolios complements the flexible approach of American Funds Multi-Sector Income Fund. This seeks to take advantage of higher yield opportunities in emerging markets and allows for more diversified exposure to local currency debt as well as U.S. dollar-denominated bonds.
How is the team thinking about retirement income given potential market volatility and inflation?
Equity allocations in the retirement income portfolios are designed to provide longer term inflation protection. Dividends are a crucial feature in retirement income model portfolios and can help mitigate downside risk. We have increased allocations to both high dividend payers and dividend growers outside the U.S. through Capital Income Builder. Our research has shown that non-U.S. equities have had better valuations, as measured by price-to-earnings ratios, and higher dividend yields relative to the U.S.
Meanwhile, the team recently sought to diversify sources of inflation protection in retirement income model portfolios by reducing dedicated longer duration inflation-protected bond exposure in the Conservative model portfolio and removing dedicated exposure in the Enhanced and Moderate portfolios. We wanted to balance the potential drawdown risk of higher duration inflation-protected bonds with higher interest rate sensitivity while ensuring we have some inflation protection. We are allocating to more flexible bond funds in our retirement income portfolios, which have the ability to dynamically invest in Treasury Inflation-Protected Securities if the opportunity arises. More perspective on retirement income can be found in “Three ideas for retirement income amid volatility and inflation.”
What drives allocation changes?
Unlike asset managers who make short-term tactical shifts in response to market conditions, we use two layers of active management. The first layer of active management is via strategic allocations, which are driven by factors such as longer-term CMAs, portfolio success metrics and active discussions within the team. CMAs don’t typically change significantly given their long-term 20-year horizon. But underlying exposures in model portfolios change more frequently — this is the second layer of active management.
Each portfolio is associated with success metrics that are based on investors' goals and constraints. This could range from higher return for growth-oriented portfolios to reduced volatility and lower maximum drawdowns in retirement income portfolios where the goal is to provide sustainable withdrawals over time and preserve capital through periods of market volatility. Once we know the constraints and goals, we decide on strategic asset allocation and use success metrics to evaluate how well the portfolio is meeting specific goals, modifying strategic allocations as needed.
Looking ahead
The U.S. economy seems likely to fuel global growth, with strong earnings prospects for companies around the world, according to Capital Group’s 2024 Mid-Year Investment Outlook. At the same time, an uncertain political environment continues to weigh on investors’ minds along with concerns about inflation and the timing of interest rate cuts. “[We may be entering] a period of much higher volatility in the years ahead,” according to Capital Group Vice Chair and Portfolio Manager Jody Jonsson. But this also “presents an opportunity for individual stock selection to make a profound difference in portfolios,” says Jonsson.
From a top-down strategic point of view, the Portfolio Solutions Committee and Capital Solutions Group continue to diversify growth model portfolio allocations across sectors and regions in a highly concentrated U.S. equity market. (Underlying fund managers aim to take advantage of company-specific opportunities in areas such as AI, which can include more growth-oriented technology firms as well as health care.) Meanwhile, investing in dividend payers can help mitigate potential market volatility and provide an inflation hedge in more growth-and-income and income-oriented portfolios. In fixed income, the team takes a flexible approach to strategic bond allocations as the Fed considers cuts, while balancing core and intentional credit allocations based on portfolio goals.
Model portfolios are only available through registered investment advisers. This content is intended for registered investment advisers and their clients.
Results as of June 30, 2024. Past results are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. For current information and month–end results, visit capitalgroup.com. Composite returns reflect changes, if any, in the underlying fund allocations over the model’s lifetime. Underlying funds may have been added or removed during a model’s lifetime. Rebalancing is performed in accordance with the investment adviser’s strategic asset allocation views for the model. Please refer to capitalgroup.com/advisor/investments/ model-portfolios.htm for historical underlying fund allocations. Composite net results are calculated by subtracting an annual 3% fee, (which is equal to or higher than the highest actual model portfolio wrap fee charged by a program sponsor) from the gross composite monthly returns, which are net of underlying mutual fund fees and expenses. Composite gross results are net of underlying mutual fund fees and expenses and gross of any advisory fees charged by model providers. Results would have been lower if such fees had been deducted. Results and results-based figures shown are preliminary and subject to change.
Investments are not FDIC–insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Contribution to returns commentary is based on representative accounts of the model composites and is net of all fees and expenses applicable to the underlying funds and gross of any advisory fee charged by model providers. The net of fees composite results shown illustrate the impact of fees on the portfolio. Attribution for underlying ETFs is based on market price.
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. Returns for one year or less are not annualized, but calculated as cumulative total returns.
When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Read details about how waivers and/or reimbursements affect the results for each fund. View results and yields without fee waiver and/or expense reimbursement.
There may have been periods when the results lagged the index(es). Certain market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
Model portfolios are subject to the risks associated with the underlying funds in the model portfolio. Investors should carefully consider investment objectives, risks, fees and expenses of the funds in the model portfolio, which are contained in the fund prospectuses. Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility. These risks may be heightened in connection with investments in developing countries. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks. The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. The use of derivatives involves a variety of risks, which may be different from, or greater than, the risks associated with investing in traditional cash securities, such as stocks and bonds.
A nondiversified fund has the ability to invest a larger percentage of assets in securities of individual issuers than a diversified fund. As a result, a single issuer could adversely affect a nondiversified fund’s results more than if the fund invested a smaller percentage of assets in securities of that issuer. See the applicable prospectus for details.
Bond ratings, which typically range from AAA/Aaa (highest) to D (lowest), are assigned by credit rating agencies such as Standard & Poor's, Moody's and/or Fitch, as an indication of an issuer's creditworthiness. If agency ratings differ, the security will be considered to have received the highest of those ratings, consistent with the portfolio's investment policies. Securities in the Unrated category have not been rated by a rating agency; however, the investment adviser performs its own credit analysis and assigns comparable ratings that are used for compliance with applicable investment policies.
For more information about the risks associated with each investment, go to its detailed information page or read the prospectus, if applicable.
Portfolios are managed, so holdings will change.
Model portfolios are provided to financial intermediaries who may or may not recommend them to clients. These portfolios consist of an allocation of funds for investors to consider and are not intended to be investment recommendations. The portfolios are asset allocations designed for individuals with different time horizons investment objectives and risk profiles. Allocations may change and may not achieve investment objectives. If a cash allocation is not reflected in a model, the intermediary may choose to add one. Capital Group does not have investment discretion or authority over investment allocations in client accounts. Investors should talk to their financial professional for information on other investment alternatives that may be available. In making investment decisions, investors should consider their other assets, income, and investments. Visit capitalgroup.com for current allocations.
The underlying funds for each model portfolio as of June 30, 2024, are as follows (allocations may not equal 100% due to rounding):
American Funds Global Growth Model Portfolio: Growth (85%): SMALLCAP World Fund 15%, The New Economy Fund 15%, EuroPacific Growth Fund 8%, The Growth Fund of America 15%, New Perspective Fund 20%, New World Fund 7%, American Funds Global Insight Fund 5%; Growth and income (15%): Capital World Growth and Income Fund 15%.
American Funds Growth Model Portfolio: Growth (80%): SMALLCAP World Fund 15%, The New Economy Fund 10%, The Growth Fund of America 25%, New Perspective Fund 15%, AMCAP Fund 15%; Growth and income (20%): Fundamental Investors 10%, The Investment Company of America 10%.
American Funds Moderate Growth Model Portfolio: Growth (45%): SMALLCAP World Fund 10%, The Growth Fund of America 20%, AMCAP Fund 10%, American Funds Global Insight Fund 5%; Growth and income (35%): Fundamental Investors 10%, Capital World Growth and Income Fund 15%, The Investment Company of America 10%; Balanced (20%): American Funds Global Balanced Fund 10%, American Balanced Fund 10%.
American Funds Growth and Income Model Portfolio: Growth (20%): SMALLCAP World Fund 8%, The Growth Fund of America 7%, American Funds Global Insight Fund 5%; Growth and income (45%): Capital World Growth and Income Fund 15%, The Investment Company of America 20%, Washington Mutual Investors Fund 10%; Equity Income (10%): Capital Income Builder 10%; Balanced (10%): American Balanced Fund 10%; Bond (15%): The Bond Fund of America 5%, American Funds Strategic Bond Fund 5%, American Funds Multi-Sector Income Fund 5%.
American Funds Moderate Growth and Income Model Portfolio: Growth (10%): SMALLCAP World Fund 5%, New Perspective Fund 5%; Growth and income (25%): Capital World Growth and Income Fund 10%, Washington Mutual Investors Fund 15%; Equity Income: (10%): The Income Fund of America 10%; Balanced (40%): American Funds Global Balanced Fund 15%, American Balanced Fund 25%; Bond (15%): The Bond Fund of America 5%, American Funds Multi-Sector Income Fund 5%, American Funds Strategic Bond Fund 5%.
American Funds Conservative Growth and Income Model Portfolio: Growth and income (27%): Washington Mutual Investors Fund 10%, American Mutual Fund 10%, Capital World Growth and Income Fund 7%; Equity Income (30%): Capital Income Builder 15%, The Income Fund of America 15%; Bond (43%): American High-Income Trust 10%, American Funds Multi-Sector Income Fund 15%, The Bond Fund of America 15%, American Funds Emerging Markets Bond Fund 3%.
American Funds Conservative Income and Growth Model Portfolio: Growth and income (20%): Capital World Growth and Income Fund 5%, American Mutual Fund 15%; Equity income (10%): The Income Fund of America 10%; Balanced (15%): American Funds Global Balanced Fund 5%, American Balanced Fund 10%; Bond (55%): American Funds Multi-Sector Income Fund 14%, American Funds Strategic Bond Fund 10%, The Bond Fund of America 19%, Intermediate Bond Fund of America 10%, American Funds Emerging Markets Bond Fund 2%.
American Funds Conservative Income Model Portfolio: Growth and income (10%): American Mutual Fund 10%; Equity Income (10%): The Income Fund of America 10%; Balanced (5%): American Balanced Fund 5%; Bond (75%): The Bond Fund of America 20%, American Funds Strategic Bond Fund 10%, American Funds Multi-Sector Income Fund 5%, Intermediate Bond Fund of America 25%, Short-Term Bond Fund of America 15%.
American Funds Preservation Model Portfolio: Bond (100%): Intermediate Bond Fund of America 45%, Short-Term Bond Fund of America 55%.
American Funds Retirement Income Model Portfolio — Enhanced: Growth (5%): AMCAP Fund 5%; Growth and income (15%): Capital World Growth and Income Fund 10%, American Mutual Fund 5%; Equity Income (38%): Capital Income Builder 18%, The Income Fund of America 20%; Balanced (25%): American Funds Global Balanced Fund 5%, American Balanced Fund 20%; Bond (17%): American High-Income Trust 5%, American Funds Multi-Sector Income Fund 7%, The Bond Fund of America 5%.
American Funds Retirement Income Model Portfolio — Moderate: Growth and income (12%): Capital World Growth and Income Fund 7%, American Mutual Fund 5%; Equity Income (38%): Capital Income Builder 18%, The Income Fund of America 20%; Balanced (20%): American Funds Global Balanced Fund 5%, American Balanced Fund 15%, Bond (30%): American Funds Multi-Sector Income Fund 9%, The Bond Fund of America 8%, American Funds Strategic Bond Fund 6%, U.S. Government Securities Fund 7%.
American Funds Retirement Income Model Portfolio — Conservative: Growth and income (7%): American Mutual Fund 7%; Equity income (33%): Capital Income Builder 18%, The Income Fund of America 15%; Balanced (12%): American Funds Global Balanced Fund 4%, American Balanced Fund 8%; Bond (48%): American Funds Inflation Linked Bond Fund 5%, The Bond Fund of America 15%, American Funds Strategic Bond Fund 10%, American Funds Multi-Sector Income Fund 8%, Intermediate Bond Fund of America 5%, U.S. Government Securities Fund 5%.
American Funds Tax-Aware Moderate Growth Model Portfolio: Growth (45%): SMALLCAP World Fund 10%, CGGR — Capital Group Growth ETF 25%, AMCAP Fund 5%; American Funds Global Insight Fund 5% Growth and income (45%): Capital World Growth and Income Fund 20%; CGUS — Capital Group Core Equity ETF 25%; Bond (10%): The Tax-Exempt Bond Fund of America 5%, American High-Income Municipal Bond Fund 5%.
American Funds Tax-Aware Growth and Income Model Portfolio: Growth (15%): SMALLCAP World Fund 8%, CGGR — Capital Group Growth ETF 7%; Growth and income (65%): Fundamental Investors 5%, Capital World Growth and Income Fund 20%, The Investment Company of America 5%, CGUS — Capital Group Core Equity ETF 25%, CGDV — Capital Group Dividend Value ETF 10%; Bond (20%): American High-Income Municipal Bond Fund 10%, The Tax-Exempt Bond Fund of America 10%.
American Funds Tax-Aware Moderate Growth and Income Model Portfolio: Growth (10%): SMALLCAP World Fund 5%, CGGO — Capital Group Global Growth Equity ETF 5%; Growth and income (55%): Capital World Growth and Income Fund 20%, CGUS — Capital Group Core Equity ETF 15%, CGDV — Capital Group Dividend Value ETF 15%, Washington Mutual Investors Fund 5%; Bond (35%): American High-Income Municipal Bond Fund 20%, The Tax-Exempt Bond Fund of America 15%.
American Funds Tax-Aware Conservative Growth and Income Model Portfolio: Growth and income (50%): Capital World Growth and Income Fund 20%, CGDV — Capital Group Dividend Value ETF 15%, Washington Mutual Investors Fund 5%, American Mutual Fund 10%; Bond (50%): American High-Income Municipal Bond Fund 25%, The Tax-Exempt Bond Fund of America 15%, Limited-Term Tax- Exempt Bond Fund of America 10%.
American Funds Tax-Aware Moderate Income Model Portfolio: Growth and income (40%): Capital World Growth and Income Fund 15%, CGDV — Capital Group Dividend Value ETF 15%, American Mutual Fund 10%; Bond (60%): American High-Income Municipal Bond Fund 20%, The Tax- Exempt Bond Fund of America 20%, Limited-Term Tax-Exempt Bond Fund of America 15%, American Funds Short-Term Tax-Exempt Bond Fund 5%.
American Funds Tax-Aware Conservative Income Model Portfolio: Growth and income (20%): Capital World Growth and Income Fund 5%, CGDV — Capital Group Dividend Value ETF 5%, American Mutual Fund 10%; Bond (80%): American High-Income Municipal Bond Fund 15%, The Tax-Exempt Bond Fund of America 20%, Limited-Term Tax-Exempt Bond Fund of America 25%, American Funds Short-Term Tax-Exempt Bond Fund 20%.
American Funds Tax-Exempt Preservation Model Portfolio: Limited-Term Tax-Exempt Bond Fund of America 60%, American Funds Short-Term Tax-Exempt Bond Fund 40%.
Model portfolio index/index blends
Global Growth — MSCI ACWI.
Growth — Index Blend: 75% S&P 500 and 25% MSCI ACWI ex USA indexes.
Moderate Growth — Index Blend: 60% S&P 500, 25% MSCI ACWI ex USA and 15% Bloomberg U.S. Aggregate indexes.
Growth and Income — Index Blend: 50% S&P 500, 25% MSCI ACWI ex USA and 25% Bloomberg U.S. Aggregate indexes.
Moderate Growth and Income — Index Blend: 45% S&P 500, 35% Bloomberg U.S. Aggregate and 20% MSCI ACWI ex USA indexes.
Conservative Growth and Income — Index Blend: 35% S&P 500, 35% Bloomberg U.S. Aggregate, 15% MSCI ACWI ex USA and 15% Bloomberg U.S. Corporate High Yield 2% Issuer Capped indexes.
Conservative Income and Growth — Index Blend: 25% S&P 500, 65% Bloomberg U.S. Aggregate and 10% MSCI ACWI ex USA indexes.
Retirement Income portfolios — S&P Target Date Retirement Income index.
Conservative Income — Index Blend: 50% Bloomberg U.S. Aggregate Index, 30% Bloomberg U.S. Government/Credit (1-3 years, ex BBB) Index and 20% S&P 500 indexes.
Tax-Aware Moderate Growth — Index Blend: 60% S&P 500, 25% MSCI ACWI ex USA and 15% Bloomberg Municipal Bond indexes.
Preservation — Bloomberg 1-5 Years U.S. Government/Credit A+ Index.
Tax-Aware Growth and Income — Index Blend: 25% Bloomberg Municipal Bond, 50% S&P 500 and 25% MSCI ACWI ex USA indexes.
Tax-Aware Moderate Growth and Income — Index Blend: 45% S&P 500, 35% Bloomberg Municipal Bond and 20% MSCI ACWI ex USA indexes.
Tax-Aware Conservative Growth and Income — Index Blend: 35% Bloomberg Municipal Bond, 35% S&P 500, 15% Bloomberg High Yield Municipal and 15% MSCI ACWI ex USA indexes.
Tax-Aware Moderate Income — Index Blend: 65% Bloomberg Municipal Bond, 25% S&P 500 and 10% MSCI ACWI ex USA indexes.
Tax-Aware Conservative Income — Index Blend: 40% Bloomberg Municipal Bond, 40% Bloomberg Municipal 1–7 Years Blend and 20% S&P 500 indexes.
Tax-Exempt Preservation — Bloomberg Municipal Bond 1–7 Years Blend.
The index blends are rebalanced monthly. MSCI index results reflect dividends gross of withholding taxes through 12/31/00 and dividends net of withholding taxes thereafter. The indexes are unmanaged, and their results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes. Investors cannot invest directly in an index. There have been periods when the model portfolio has lagged the index/index blend.
S&P 500 Index is a market capitalization–weighted index based on the results of approximately 500 widely held common stocks.
The S&P Target Date Retirement Income Index, a component of the S&P Target Date Index Series, has an asset allocation and glide path that represent a market consensus across the universe of target date fund managers.
The S&P 500 Index and S&P Target Date Retirement Income Index are products of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2024 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of S&P Dow Jones Indices LLC.
MSCI All Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market results in the global developed and emerging markets, consisting of more than 40 developed and emerging market country indexes. Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter.
MSCI All Country World ex USA Index is a free float–adjusted market capitalization weighted index that is designed to measure equity market results in the global developed and emerging markets, excluding the United States. The index consists of more than 40 developed and emerging market country indexes. Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter.
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Bloomberg U.S. Aggregate Index represents the U.S. investment–grade fixed–rate bond market.
Bloomberg U.S. Corporate Investment Grade Index represents the universe of investment grade, publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements.
Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index covers the universe of fixed–rate, non–investment–grade debt. The index limits the maximum exposure of any one issuer to 2%.
Bloomberg High Yield Municipal Bond Index is a market–value–weighted index composed of municipal bonds rated below BBB/Baa.
Bloomberg Municipal Bond Index is a market–value–weighted index designed to represent the long–term investment–grade tax–exempt bond market.
Bloomberg Municipal Bond 1–7 Year Blend Index is a market–value–weighted index that includes investment–grade tax–exempt bonds with maturities of one to seven years.
Bloomberg 1-3 Year U.S. Government/Credit Index is a market-value weighted index that tracks the total return results of fixed-rate, publicly placed, dollar-denominated obligations issued by the U.S. Treasury, U.S. government agencies, quasi-federal corporations, corporate or foreign debt guaranteed by the U.S. government, and U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity and quality requirements, with maturities of one to three years.
Bloomberg 1–5 Year U.S. Government/Credit A+ Index is a market–value weighted index that tracks the total return results of fixed–rate, publicly placed, dollar–denominated obligations issued by the U.S. Treasury, U.S. government agencies, quasi–federal corporations, corporate or foreign debt guaranteed by the U.S. government, and U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity and quality requirements, with maturities of one to five years, including A–rated securities and above.
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Capital market assumptions are long-term projections of the future performance of asset class returns based on their respective benchmark indexes or other proxies that incorporate analysis and observations. This analysis represents the views of a small group of investment professionals based on their individual research and are approved by the Capital Market Assumptions Oversight Committee. They should not be interpreted as the view of Capital Group as a whole. As Capital Group employs The Capital System, the views of other individual analysts and portfolio managers may differ from those presented here. They are provided for informational purposes only and are not intended to provide any assurance or promise of actual returns. They reflect long-term projections of asset class returns and are based on the respective benchmark indexes, or other proxies, and therefore do not include any outperformance gain or loss that may result from active portfolio management. Note that the actual results will be affected by any adjustments to the mix of asset classes. All market forecasts are subject to a wide margin of error.
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