The 60/40 portfolio composed of stocks and bonds, respectively, has somewhat fallen to the wayside in the past decade. But with optimism flooding the bond markets for 2024, it could make a comeback.
Vanguard, an ETF provider of fixed income products, has been one of the staunch supporters of the 60/40 portfolio. That was even the case in 2022, when Fed rate hikes were causing both the stock and bond markets to fall.
“Since last year, Vanguard has been pushing back against the view that the 60/40 way of investing is over or is dead,” said Roger Aliaga-Diaz, Vanguard’s chief Americas economist and global head of portfolio construction. “In fact, what we see from our capital market outlook: The future 60/40 is actually much brighter now than during the years of easy money, prior to COVID with zero rates.”
He also added that the 60/40 portfolio is returning to normalcy regarding returns. They are starting to average between 5%-7%. That falls in line with the typical 60/40 portfolio performance.
The prevailing sentiment in the capital markets is that rate cuts will eventually occur in 2024. And that should push bond prices higher.
“This will bring the rate down [and]help the bond side of the portfolio, and vice versa [with equities],” Aliaga-Diaz added.