The classic 60/40 investment strategy shows the worst return in 100 years. How about 40/60?

The rules of thumb in investing seem to no longer apply in the financial markets by 2022.

Proponents of a 60/40 portfolio split, designed to capture the upside in stocks but provide downside protection for investors in bonds, have seen Classic investment strategies collapsed this year.

Instead of generating an average return of 9%, this strategy has instead delivered a monstrous return of minus 30% year-to-date (see chart), marking its worst run in years. about a century, according to BofA Global.

The collapse of the 60/40 strategy in 2022 is the worst in about 100 years

Global BofA

According to BofA Global, that makes for almost the worst return on a 60/40 strategy since 1929.

Financial markets have been volatile this year as the Federal Reserve has worked to raise interest rates significantly to combat inflation, which has been stuck near 40-year highs for longer than expected.

A hot headline on inflation Thursday led to a day of dramatic volatility, said Rick Rieder, chief investment officer for global fixed income at BlackRock Inc.,

called onear the “craziest” days in the financial marketsin an interview with Christine Idzelis of MarketWatch.

Rieder also said the classic 60/40 portfolio allocation, with the largest portion of stocks and the smaller portion of bonds, no longer makes sense. With bond yields higher today, especially with yields on 2-year Treasuries

at 4.5%, he thinks the 60% allocation should shift to bonds.

10-year Treasury bond yields surged

This year’s growth rate of about 4% has hit the bond market again and raised borrowing costs for households and corporations already struggling with high inflation.

Stocks continue to lose ground on Friday, with the S&P 500

down about 1.7% at the last check, but down about 24% from the start of the year. Dow Jones Industrial Average

down 250 points, but down about 18% for the year and the Nasdaq Composite Index

was trading 2.3% lower on Friday and down 33.5% on the year.

Also read: Why the 60/40 model suddenly came to life again


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