Asset Allocation Views
July 1, 2008 Consumers were spending their tax rebates right on schedule, raising retail
sales in May. Higher gasoline prices, however, now threaten to cancel out
UPDATE the stimulus provided by the rebates. GDP growth is likely to decelerate in
2H as the stimulus from the rebates wears off and higher energy costs
dampen consumer spending.
Bond and futures markets priced in a series of future rate hikes after Fed
Chairman Ben Bernanke warned about inflation in a speech in early June.
Fed officials have since signaled that they believe the markets have priced in
too much tightening too soon.
Before tightening, the Fed will want to wait until it can determine whether the
boost to the economy from the fiscal stimulus package and past monetary
easing will last into the third and fourth quarters of this year, and how much
damage $141 per barrel oil has done to the economy, in our view.
Commodity prices and weakness in the dollar are putting upward pressure
on headline consumer price inflation. There is no evidence yet, however, that
a wage-price spiral is developing that would raise core inflation.
After rising over 12% from its low in early March, when concerns about a
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recession and financial system instability were at the fore, sentiment has
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taken a turn for the worse in the U.S. stock market. It will likely take lower oil
Brian Gendreau, Ph.D. prices and a rebound in growth for the market to rally from current levels.
Investment Strategist
212.309.8276 On July 1 we moved back to neutral in U.S. large-cap, mid-cap, and small-
brian.gendreau@inginvestment.com cap stocks and raised our allocation to bonds to neutral. With the market
being driven by oil prices, overweight equity positions are vulnerable to a rise
Paul Zemsky, CFA in oil prices, and underweight positions risk missing any gains that occur if oil
Head of Multi-Asset Strategies and Solutions prices fall.
212.309.1798
paul.zemsky@inginvestment.com GDP growth in the eurozone, the U.K. and Japan is decelerating. The ECB,
meanwhile, has signaled that it is inclined toward a one-off raise in policy
Nora Omarova rates in July to dampen inflation expectations. With rising risks to both growth
Senior Quantitative Analyst and inflation abroad we choose to maintain our neutral position in
212.309.6582
international equities.
eleonora.omarova@inginvestment.com
Current Positions
Rachael M. Camargo Recommended Change from
Portfolio Specialist
212.309.1734 Benchmark (%) Allocation (%) Last Move
rachael.camargo@inginvestment.com Stocks 65.0 65.0 Neutral Reduced
Bonds 35.0 35.0 Neutral Raised
Cash 0.0 0.0 Neutral Unchanged
Allocation among stocks
Domestic stocks
Large-cap core stocks 18.0 18.0 Neutral Reduced
Large-cap growth stocks 13.5 13.5 Neutral Unchanged
Large-cap value stocks 13.5 13.5 Neutral Unchanged
Mid-cap stocks 4.0 4.0 Neutral Raised
Small-cap stocks 6.0 6.0 Neutral Raised
International Stocks
EAFE stocks 10.0 10.0 Neutral Unchanged
Total stocks 65.0 65.0
Please refer to important disclosures at the end of this report.
July 1, 2008
ING’s Asset Allocation Platform Asset Allocation Committee Members
Rick Nelson
ING provides a fully integrated strategic planning and Chief Investment Officer
management service. Through mutual funds, collective
trust funds or separate accounts, ING offers investment Paul Zemsky, CFA
opportunities in domestic and international equities, fixed Head of Multi-Asset Strategies and Solutions
income, and short-term money market instruments. ING Omar Aguilar, Ph.D.
first offered asset allocation services to investors in the Head of Quantitative Equity Research
early 1980s. The major objectives of the program, which
have remained unchanged, are: Robert Browne
Head of Proprietary Investments
A customizable approach that can meet the unique Christopher Corapi
needs of each client Head of Fundamental Equity
Active asset allocation at the strategic and Brian Gendreau, Ph.D.
tactical levels Investment Strategist
A fully integrated program capable of managing all of Martin Jansen
an investor’s assets or provide a complement to other Senior Portfolio Specialist – International Equities
managers’ capabilities or styles
James Kauffmann
A rebalancing discipline that keeps the client’s portfolio Head of Fixed Income
in balance without incurring inordinate trading costs
Gene Lancaric, CFA
We adopt a disciplined and transparent investment Senior Portfolio Manager
process that uses rigorous quantitative analyses
in support of the investment judgment of seasoned Uri Landesman
professionals. Head of International Equity
This report does not make any recommendation about your
investments, and this information should not be considered
investment advice. Any opinions expressed herein reflect
our judgment at this date and are subject to change.
Certain of the statements contained herein are statements
of future expectations and other forward-looking
statements that are based on management's current views
and assumptions and involve known and unknown risks
and uncertainties that could cause actual results,
performance or events to differ materially from those
expressed or implied in such statements. Actual results,
performance or events may differ materially from those in
such statements due to, without limitation, (1) general
economic conditions, (2) performance of financial markets,
(3) interest rate levels and (4) increasing levels of loan
defaults.
Please refer to important disclosures at the end of this report. 2