NEW YORK (TheStreet) -- Asset allocation is almost gospel to the investment advisory profession. Classic asset allocation generally calls for a balance between stocks and bonds, depending upon your age and risk tolerance.For instance, if you are 60 years old, you should have 60% of your assets in bonds and 40% of your assets in stocks. As you get older, you continue to put more in the so-called "safer" bucket of bonds, and less in the so-called "riskier" bucket of stocks. What happens when a freight train is headed for an asset class?
I am very much a contrarian in my belief and practice, but I think that these latest episodes in the bond and precious metals markets once again point to a gaping hole in the classic allocation model, however. Maybe it is so popular because it is the easy way out? So what are the best asset classes to be in right now?
Data from Best Stocks Now App This current trend has been in place for over one year now. It is still in place. As you can see from the above screenshots of the Best Stocks Now app., the top eight of the 45 asset classes that I track are all stock related. In addition to this it is the small and mid-cap domestic stocks that continue to rule the roost. Let's first look at the big equity picture. Here is a current chart of the Dow Jones Industrial Average: The Dow hit an all-time high of 15,589 this past week. It is now up almost 9,000 points since its March, 2009 low. The S&P 500 also hit a new all-time high this past week. The four-year and four-month bull market remains intact for now. It ain't over 'til it's over. Now let's drill down a little further in the market. Here is a chart of the number one ranked asset class from among the 45 that I track: Small-cap dividend, small-cap value, and small-cap growth continue to outdistance the other asset classes by a wide margin. This trend has now been in place for over one year. How important is this to know? How important will it be to also know when this area of the market begins to fall out of favor? As you saw previously, the bond market gave plenty of warning before its almost 18% drop. There is no defense against a sudden, overnight event, however. This would be a case to be made for asset allocation, but I don't think that it is a strong enough case to sacrifice so much performance over time. That is a decision that each individual has to make. With the S&P 500 up 25.6% over the last 12 months, it is hard to accept big negative returns in the bond market, especially when it was obvious that a freight train was headed straight for it. Asset allocation anyone? Follow @pwstreet This article was written by an independent contributor, separate from TheStreet's regular news coverage.