Need to Know: Vanguard says the outlook for the 60/40 model is looking rosier, but here’s the asset allocation it prefers the most

And even hawks like Minneapolis Fed President Neel Kashkari say there are tentative signs that inflation has peaked. Data out of Italy on Thursday morning reinforced that view.

According to Vanguard, the nosedive in asset prices last year has raised expectations for performance over the next decade, “because yields on developed-market sovereign debt are the foundation on which other risky returns are built,” he says. The balanced portfolio, he says, still offers the best chance of success.

As the chart shows, however, its model for asset allocation has more of a tilt toward bonds and emerging markets than a conventional 60/40 model. It’s a 50-50 model between stocks and fixed income, including 10% for emerging market stocks.

The market

U.S. stock futures
ES00,
-0.63%
 
NQ00,
-0.75%
flipped lower after an unexpectedly strong ADP private-sector jobs estimate. The yield on the 2-year Treasury
TMUBMUSD02Y,
4.470%
rose 10 basis points to 4.45%.

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The buzz

ADP estimated 235,000 private-sector jobs were created in December, as the Labor Department reported a big 19,000 drop in weekly jobless claims, down to 204,000.

St. Louis Fed President James Bullard is due to deliver a speech at 1:10 p.m. Eastern after hawkish Federal Reserve minutes were released on Wednesday.

Amazon.com
AMZN,
-0.79%
said its layoffs will total more than 18,000 employees, mostly in its corporate ranks, in retail and recruiting in particular.

Silvergate Capital
SI,
+27.10%
shares tumbled 40% as the crypto-focused bank said total deposits from digital asset customers declined to $3.8 billion at the end of the year from $11.9 billion, and that it was reducing 40% of its workforce. Another crypto-focused bank, Signature Bank , also fell in premarket trade.

Exxon Mobil
XOM,
+0.29%
late Wednesday gave an update on fourth-quarter performance, that analysts at RBC Capital Markets say imply earnings per share modestly below consensus expectations.

Tesla
TSLA,
+5.12%
saw its Chinese deliveries drop 21% year-over-year in December.

Western Digital
WDC,
+5.22%
shares rose in premarket trade after Bloomberg reported it’s restarted merger talks with Kioxia Holdings.

The Consumer Electronics show officially kicks off Thursday.

The House of Representatives is back in action at noon Eastern after six rounds of voting that so far have not seen Rep. Kevin McCarthy become speaker.

Best of the web

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The Catholic Church conducted a historic funeral for Pope Emeritus Benedict XVI, with a mix of ancient rituals and new precedents.

Top tickers

Here were the most active stock-market tickers as of 6 a.m. Eastern.

The chart

It’s darkest before dawn, and in equity markets as well. Analysts at Goldman Sachs point out that equity markets tend to recover close to the peak in interest rates — but often drop into the final rate rises. “Further weakness in the labor market in the U.S. – or higher energy prices in Europe – could well push the momentum data to be weaker in 1H 2023. This is an important data point to gauge when equity markets can sustain a recovery,” they say.

Random reads

A bluefin tuna was auctioned for $273,000 at a new year’s auction in Tokyo — more than double the top price last year.

Hong Kong is lifting a year-long ban on hamster imports.

How a furniture conservator solved a 20,000-year-old Ice Age puzzle.

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