Trump Is Making the 60/40 Portfolio Great Again
The president-elect’s agenda promises uncertainty and volatility for stocks. A healthy exposure to bonds may be key to peaceful sleep.
Speed bumps ahead.
Photographer: Michael Nagle/Bloomberg
The post-election stock market is already giving investors a wild ride. Big individual stock selloffs, massive rallies, and a dizzying array of market narratives built on Wall Street’s best attempts to read President-elect Donald Trump’s mind. All told, the S&P 500 Index is up about 3% since Election Day, but the numbers don’t do justice to the tenuous feeling around all of it. That combination of policy uncertainty with some of the highest valuations since 2021 may spur renewed interest in risk-management strategies. Fortunately, there’s an easy one at everyone’s disposal.
Before attempting to Trump-proof any portfolio, investors should ask themselves a couple of key questions. First, can you keep your political biases in check? If not, you probably need to adjust your risk exposure. With Trump, you either love the guy or hate him, and investors are at their best when they’re at their most dispassionate. I worry that a toxic mix of politics and market volatility might induce people to do something foolish like sell at market bottoms. Or go all-in at tops. One of the most important aspects of a sound investing strategy is finding a way to sleep at night so you can ultimately stay invested.