Is the 60/40 Portfolio Dead?
The classic 60% stocks / 40% bonds playbook was built for a world of falling interest rates, globalization, and tame inflation. That world has changed.
From tailwinds to turbulence
For roughly four decades, 60/40 rode a powerful set of macro tailwinds. Today, many of those forces are running in reverse.
1982–2021: Old regime
- Falling rates: bond prices rose for decades as yields dropped.
- Globalization: cheap labor and efficient supply chains kept inflation low.
- Central bank backstops: rate cuts and QE rescued both stocks and bonds.
2022 and beyond: New regime
- Inflation returned: prices rose, forcing central banks to hike aggressively.
- Higher yields: rising rates pushed bond prices down instead of up.
- Deglobalization & conflict: supply shocks and geopolitical tension added friction and volatility.
Why 60/40 struggles in this regime
Problem 1
Bonds aren't the same "safe" diversifier
In a stagflationary or high-inflation regime, bonds can lose value at the same time as stocks. The negative correlation that made 60/40 work can break down.
Problem 2
Weak diversification
When inflation spikes or central banks tighten policy, stocks and bonds can move together (positive correlation), eliminating the diversification benefit.
Problem 3
Sequence-of-returns risk for retirees
Retirees drawing down their portfolios are especially vulnerable when both asset classes fall at once, as they did in 2022.
A new playbook for a choppier world
Modern portfolios need more than just "stocks and bonds." Think in sleeves: value and quality equity, real assets, T–Bills and short duration, managed futures, and crisis / rate-hedge ETFs that act as brakes during volatility.
- Value & quality equity: focus on strong balance sheets and reasonable valuations.
- Real assets: gold, commodities, and resource equities for inflation protection.
- T–Bills / short duration: liquidity with limited interest-rate risk.
- Managed futures / trend-following: can profit in both rising and falling markets.
- Crisis / rate-hedge ETFs: behave like brakes without you having to trade options directly.
Ghost Allocator takes this sleeve-based approach and maps it onto the actual funds and ETFs available in plans like OKCFD's Voya 457 and Schwab BrokerageLink.