Asset Allocation Enhancements: Extended History & Tax Consequences

After further client feedback on our Asset Allocation Engine tool, we are adding 2 extra features.

• Extend the VP Macro Regime Scores back to 1994. This allows a more extended backtest to be run on the Equity vs Bond vs Cash portfolio. We present case studies of the model behavior in the mid-90s soft landing and in the aftermath of the dot-com bust.
• Explicitly calculate the tax consequences from realizing short-term and long-term capital gains. All backtests now output an annualized after-tax return (assuming the highest rax rates).

Nov 2024 Update: The VP Macro Regime score is still in Neutral range, suggesting investors should try to stay in line with benchmark weights for equities vs bonds. The policy component remains the overwhelming positive factor propping up the risk asset outlook. 

The model's largest sector overweights are still Communication Services and Energy, while the biggest underweights are now Financials and Technology.