Bonds Hold Value in 60-40 World, So Long as You Adjust for Risk
- Cornerstone Macro cites low term premiums for investor angst
- Treasuries are still seen as beneficial as a risk hedge
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As Mark Twain might have put it, the demise of debt’s value within the long-favored 60-40 stock-bond diversified portfolios is greatly exaggerated -- when you adjust for risk.
That’s the view of Cornerstone Macro LLC after analyzing returns of portfolios with a 60-40 stock-bond mix over about the past decade under various market scenarios. Benson Durham, who served on the Federal Reserve Board and New York Fed in addition working at private firms including Brevan Howard Asset Management, was among authors of two reports that detailed the firm’s conclusions.