If you believe an ineffectual Fed will push up interest rates but fail to contain inflation, and that economic growth will slow, then 60:40 may be a volatile portfolio with weak returns.
worst year for so-called 60:40 portfolios on an inflation-adjusted performance since the Great Depression
BlackRock, the world’s biggest money managers, suggests investors should abandon portfolios made up of 60 per cent stocks and 40 per cent bonds.That doesn’t mean other asset classes cannot be used for diversification, but they will be evaluated based on their correlation with 60:40, and their allocations will change depending on market conditions. And investors need not be wedded to the core allocation, as tactical adjustments might be made to the proportions.
BlackRock did not rely solely on dismal 2022 performance and the reduced diversification value of bonds since 2015 for its call. One of the economic arguments for 60:40 is that the phase of the business cycle that causes stock prices to fall tend to bring lower interest rates, which help bonds.
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