A key challenge for the 60/40 portfolio has been the weakening of the stock-bond relationship that has historically supported diversification. This reflects a broader shift in market structure from the post-GFC environment, when macroeconomic shocks were largely demand-driven. Today, the environment is shaped by persistent supply-side disruptions, including the pandemic and subsequent geopolitical events that have contributed to higher energy costs and broader price pressures.

The nature of these shocks matters for the role of bonds in portfolios. In demand-driven slowdowns, bond prices typically rise as yields fall to support economic growth, helping to cushion losses in risk assets. Supply-side disruptions can have the opposite…