Reports Of 60/40’s Demise Were Greatly Exaggerated (Laphroaig Bottle)

Predicting the demise of 60/40 has been a fool's errand. To be sure, it's not hard to parrot a plausible narrative for why a traditional, balanced portfolio will struggle to deliver the "have your cake and eat it too" kind of performance witnessed over the past two decades (give or take). For one thing, life doesn't offer up many "have your cake and eat it too" opportunities. They aren't supposed to exist. Generally speaking, purported instances of such opportunities usually fall into the "if
Every story you need, no story you don't. Get the best daily market and macroeconomic commentary anywhere for less than $7 per month. Subscribe or log in to continue.

5 thoughts on “Reports Of 60/40’s Demise Were Greatly Exaggerated (Laphroaig Bottle)

  1. My son has a great sense of humor relative to the absurdity of human beliefs. So he sends me podcasts occasionally depicting these. Thanks for an additional one…

  2. That April 5th note is scary on re-read. Unbelievable year.

    That asset class is if kind of over. So, too, might be conventional thinking that was applied from 1985 to 2020.

    Let’s all hope we get another rally. (Easy to see how it could happen.) Buy ourselves six more months of time to try to sort it out. It’ll be a great opportunity for small players, i.e., retail, to sell ahead of the big boys. haha

    No way RIAs and others are going to sit on dead money. But, what?

    I suspect high net worth clients have already been receiving research from Goldman, BoA, JPM, and DB, on what to do with the dead money 40. I’ll be curious to read what drips into the public domain from these teams.

  3. We’ve been using SPX deep OTM Puts for the last 3 years.

    But we’re actually questioning the rationale. If you have a long enough horizon, what is the purpose of trading off perf. for vol. reduction? Sure, institutional clients love vol. reduction coz career risks. But what if profit maximization is your goal?

  4. As a practitioner this article addresses an issue that is top of mind for me. In case anyone cares here is my observation. I typically like to invest in spread product for my fixed income allocation. I have become a lot pickier about spread product lately. With these rates it really has little purpose. I do still use some closed end funds where i can invest for clients and still get a decent risk adjusted yield if they trade at a high enough discount. Otherwise not a big fan. If fixed income is a poor hedge (spread product), is not very liquid (spread product) , and offers little yield (spread product), what is the point? So now I am down to agency, treasury and maybe but not likely very high grade taxable muni debt for the fixed income allocation. If I am worried about duration, including my equity allocation- the answer seems to be to look away from tech, growth etc. Why? I want to use my duration bucket for my bond allocation- that is with the yield curve pretty steep from 10-30 years a long US Treasury provides comparative high sovereign yield and is a decent hedge to equities. What can hedge that duration. Shorter duration equities- that is value, international which has a decent value tilt, and small and mid-cap equities which have lagged. So now I am going to tilt away from equity growth and spread bond product. I wil be emphasizing equities which do better in a bit of a bounce back coming out of the recession with a long US Treasury/Agency hedge. Best I can do- and I will probably throw in some gold and real estate stocks to lower the equity correlations….I probably shoot for a bit higher equity allocation as well- so maybe the new 60/40 is now 65/35 or 70/30…..

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.

NEWSROOM crewneck & prints