The case for seeing equities as one global beta is compelling if you're looking out over very long time frames. But in the shorter term, perhaps even as long as 10 or 20 years, the rationale for making geographic distinctions is persuasive. Why? The answer begins by recognizing that valuations differ, as do trailing returns, throughout the world at any given time. As a result, expected returns vary, sometimes by quite a lot among the regional components that collectively make up the global equity market.

Add in the fact that different investors have different risk tolerances, investment horizons and financial situations and you're looking at a persuasive argument for adjusting global equity allocations through time to match your particular outlook and personal outlook.

With that in mind, comparing recent performance among the world's major equity regions offers some ideas about how the future may unfold, with an emphasis on "may." We go into a bit more detail about our thoughts in the soon-to-be published July issue of The Beta Investment Report.

Meantime, let's observe here that the U.S. stock market is a laggard midway through 2009, as it is for the five years through June 30, 2009. That alone doesn't tell us much. But as we consider other market metrics and put some of the information into broader context with a multi-asset class portfolio, the trend suggests that maybe it's time to begin raising U.S. equity allocations, or at least thinking about doing so, within a global equity asset allocation mandate.

The U.S., to be sure, has its share of troubles and so there are reasons why this equity market has fallen behind the rest of the world. What's more, the relative sluggishness in performance may continue for some time. Risk, in short, is still alive and kicking. But to the extent the U.S. lags, it suggests that it's time for strategic-minded investors to start considering holding an above-market weight share of U.S. equities within a global stock market mix. (Keep in mind that an above-market-weight allocation in U.S. equities doesn't necessarily mean its time to own an above-market-weight share of stocks overall. That's a separate although critical question.)

Regardless of whether this is a good time to adjust equity allocations, or not, every investor faces a basic choice: Allow Mr. Market to manage the asset allocation vs. taking control of the mix. If you opt for the latter there's no getting around the fact that you'll have to continually assess the delicate balance of risk and return. Easier said than done, particularly in real time.

The challenge inspires the idea that Mr. Market's allocation may be preferable. And to some extent it is, although in a narrow sense. Indeed, the market portfolio, which holds all the major asset classes in their market-value weights, is the optimal portfolio for the average investor over the long haul.

To the extent that you're not average, you may want to hold something different than the market portfolio. That's a core principle for strategic-minded investing, and an eminently simple one too. The dirty little secret for managing asset allocation is that once you recognize that you're something other than average, and decide to do something about it with asset allocation, the details get messy fast. That's one reason for thinking that deviating too far from Mr. Market's asset allocation may be asking for trouble. Indeed, consider that almost no one holds a passive asset allocation, although collectively it all adds up to the market portfolio, broadly defined among the world's major asset classes, i.e., stocks, bonds, REITs and commodities. But while most of the world's investors each hold something other than the market portfolio, it's unlikely—indeed impossible—that everyone's smarter than Mr. Market. No wonder, then, that a little humility is necessary for survival in a world where everyone thinks they're above average.