Inflation Is the Biggest Threat to the Bedrock 60/40 Portfolio
- Popular retirement asset-allocation strategy could be at risk
- Expensive stocks drive gains in 2021 with bonds in the red
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Wall Street likes to warn that past performance doesn’t guarantee future results, but when it comes to the traditional 60/40 mix of stocks and bonds, it kind of has. Persistent inflation could bring that to an end.
The strategies, in which portfolios hold 60% stocks and 40% bonds, have produced just two down years since 2007. And during the pandemic they’ve been beating averages dating back to the 1980s. The asset allocation mix posted a 17% return in 2020 and is on course for another double-digit return this year. But it posted losses in September and November and is down 0.4% so far in December, just as the Federal Reserve started signaling a hawkish shift.