Rethinking 60/40 Portfolios for Asset Allocation
The 60/40 portfolio has for decades provided investors with a relatively safe and straightforward way to diversity their holdings and enjoy healthy returns with low volatility.
That’s until the pandemic severed the link between economic growth and inflation, reducing bonds’ ability to soften losses in stocks and dimming the glow for investors who put 60% of their portfolios into stocks and 40% into fixed-income assets.
Morgan Stanley economists predict that growth, inflation and interest rates will start easing this year and next as the global economy finally puts monetary policy driven by COVID and its aftermath in the rearview. That should also help recalibrate the stock-bond correlation and revive the 60/40 portfolio’s…
