60/40 Portfolio Set to Outperform Over the Next Decade

Much ink has been spilled over the death of the 60/40 portfolio. However, declaring the demise of the 60/40 portfolio could be a mistake. Such is particularly the case as equity returns remain slated to be lower over the next decade due to high valuations.

We bet a 60/40 portfolio could outperform an all-stock index over that period.

While that may sound like a bold statement, there are several important reasons why such could be the case. However, let’s start with the basic premise of why many proclaim death to the allocation.

“The 60/40 portfolio is no longer a good option for investors. With long-term interest rates set to rise, along with inflation, stocks provide the only solution to delivering returns.”

With rising interest rates and inflation, such would seem a logical assumption. In fact, 2022 has been one of the worst years for returns from a 60/40 portfolio.

60/40 portfolio, 60/40 Portfolio Set To Outperform Over The Next Decade

Unfortunately, 2022 was quite an anomaly of surging interest rates and inflation. The longer-term view suggests recent performance will not continue due to expanding debts and deficits. The economic drag from rising debt levels will ensure lower rates in the future.