Analysts Predicted The Demise Of The 60/40 Portfolio — But It's Making A Comeback

Zinger Key Points
  • The idea of buy low/sell high is saving the 60/40 investment model
  • Bank Managers are predicting a comeback for the 60% S&P 500, 40% US 10-year treasury bond portfolio model
Analysts Predicted The Demise Of The 60/40 Portfolio — But It's Making A Comeback

The 60/40 model is having one of its worst years due to the U.S. bear market. The portfolio was designed to help investors maintain long term gains while having the simplest possible portfolio composition. 

Sixty percent of of the portfolio is the SPDR S&P 500 ETF Trust SPY while the other 40% is the 10-year U.S. Treasury bond. 

Many considered the philosophy to be dead due to low income generated on the fixed income side due to a slowing economy, according to MarketWatch.

Yet it seems that the 60/40 model is beginning to come back to life. Investors have realized that eventually the U.S. market will recover, making no the perfect time to buy for many. If you're using the basic ideal of buy low/sell high, now is the perfect time to maximize future returns.

Morgan Stanley's Take: "As prices have declined, those expected returns have gone up,” Andrew Sheets, chief cross-asset strategist at Morgan Stanley MS, said in a note.  

U.S. investors in a 60/40 portfolio could see a return of 6% of their money, following the average of the last 20 years. With the European economy in better shape, European investors would see a return of ~8%, according to MarketWatch.

PIMCO CIO Says 60/40 Alive And Well: Pacific Investment Management Company, LLC (PIMCO) Chief Investment Officer Dan Ivascyn shared in a recent sit down with PIMCO Senior Advisor Roger Nieves that he believes the 60/40 model is not dead.

Although the portfolio's gains have slowed this year, the market will eventually return to normal as inflation begins to decrease, Ivascyn said. He explains that when this happens, investors will once again make consistent returns.

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