The 60-40 portfolio just doesn't 'cut it anymore' in this market, Wharton's Jeremy Siegel says (via ETFEdgeCNBC)
The Siegel-WisdomTree funds will try to solve for that problem by offering low-cost, high-yield investment strategies that highlight one of Siegel's main arguments from "Stocks for the Long Run": that stocks may be subject to volatility in the short term, but ultimately have less long-term volatility when compared with bonds.
"That's why we recommend 75/25 as the equity/fixed-income allocation," he said, adding that it "would be the best way for those approaching retirement to establish their assets to get enough income and gains so they can maintain spending through retirement." Global central banks have been partly to blame for the yearslong decline in interest rates as their monetary policies become more accommodative, but they're hardly the only driver of the phenomenon, the professor said.Siegel cited other "powerful demographic factors" such as the aging of the global population, longer average life expectancy, a broader inclination to avoid risk and slower growth in the overall markets as additional depressants for Treasury yields.
"All these factors are going to keep these interest rates in these levels very long, and you cannot survive on a one-and-a-half-percent nominal interest rate," he said.. The real interest rates are negative now," he said, referring to the Treasury Inflation-Protected Securities version of the U.S. 10-year Treasury, which is adjusted based on consumer price patterns.
"It cannot maintain spending streams at all. Dividends on stocks are going to be the new bond in terms of thinking about retirement."
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