Proponents of the so-called 60-40 portfolio are betting the strategy may soften the blow of a possible U.S. recession next year, though its much-touted diversification properties offered investors little relief in 2022.
is down 11% this year and on track for its largest fall on record, while the benchmark U.S. 10-year Treasury yield stands at around 3.7%, up from 1.49% at the start of 2022.
While this year's lockstep moves in stocks and bonds were spurred by soaring consumer prices, such an inflationary shock is unlikely to recur in 2023, said Roger Aliaga-Diaz, chief economist for the Americas and global head of portfolio construction at Vanguard. U.S. inflation fell for a second straight month in November,Consecutive annual declines in the 60/40 portfolio have been rare. Since 1977, U.S.
And while Vanguard and other 60/40 proponents say the selloff in stocks has made the portfolio's equity side more attractive due to falling valuations, a recession couldThe S&P 500 has fallen by an average of 28% in recessions since World War Two, data from CFRA showed, though some argue this year's tumble - which hit 25.2% in October - suggests equities have at least partially factored in a slowdown. The S&P 500 is down about 20% on a year-to-date basis.
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