I remain neutral on equities, but I would tilt portfolios. Within equities, I would favor U.S. equities, followed by modest tilts toward U.K. and Canadian equities. I would tilt away from European and Japanese equities. Growth in Europe will likely be sluggish for some time, and the booming export market to China will slow along with Chinese growth. Japanese equities are quite inexpensive on a price to book value basis, but I now think they could well remain cheap--as they have for years. Secular Japanese problems will likely weigh on stocks, and managements (though better than they used to be) are not generally shareholder-oriented. Many Japanese firms do, however, score well in sustainability measures of management quality.
Within fixed income, I would move out of U.S. government issues into corporate issues, both investment grade and high yield. Yield spreads are historically attractive, and corporate finances are generally sound.
Elsewhere, sentiment toward the U.S. dollar is quite elevated. The converse is gold, which has taken quite a hit lately. It is plausible that gold's success this year has led to profit taking. I have been uneasy that gold has risen in 11 consecutive years. I've thought that it could have one final burst, in a speculative blow off that would mark the end of its bull market. I also have been uneasy about anecdotal reports of vending machines in the middle east that sell gold bullion, and central bank buying of gold (CB's tend to be good contrary indicators). Yet, gold is still a small fraction of the typical institutional portfolio. I think the recent decline is not enough to warrant buying gold, and it is worth waiting for a higher price for selling gold. Within a range of 0-20% of a portfolio allocation to gold, I'd be at about 10% here.