Source: Fox Business
For decades, the 60/40 portfolio—60% equities and 40% bonds—has been the gold standard for balanced investing. But according to BlackRock, the world’s largest asset manager with over $10 trillion in assets under management, it might be time to evolve.
In a new outlook, Gargi Chaudhuri, Head of iShares Investment Strategy at BlackRock, said investors need to “move beyond outdated diversification strategies” to navigate today’s high-volatility, high-interest-rate world.
“We believe that traditional stock and bond portfolios are no longer sufficient to weather the volatility we see ahead,” said Chaudhuri. “The historical negative correlation between equities and bonds has weakened significantly.”
The breakdown in the equity-bond relationship is largely due to macroeconomic headwinds:
“When inflation is the primary risk—like it has been since 2021—stocks and bonds tend to fall together,” explained Chaudhuri.
So what’s the alternative? According to BlackRock, it’s about intentional diversification, not just mixing assets arbitrarily.
Here’s what BlackRock recommends:
Private credit, infrastructure, and real estate can provide non-correlated income and hedge inflation risk.
Global diversification can reduce home-country bias and tap into undervalued regions.
Rather than relying solely on long-term Treasurys, BlackRock suggests diversifying into:
Chaudhuri recommends tilting portfolios toward quality, value, and dividend-paying stocks, which tend to outperform during inflationary and volatile periods.
BlackRock isn’t alone in this thinking. Firms like J.P. Morgan, Vanguard, and Goldman Sachs have also echoed concerns about the 60/40 model’s limitations. Vanguard recently noted that adding just 10% alternatives to a traditional portfolio could improve risk-adjusted returns by up to 15%.
“Investors need to be forward-looking,” said Chaudhuri. “The market conditions that made 60/40 successful in the past are unlikely to repeat.”
In today’s environment, volatility is the norm, not the exception. And as inflation, interest rates, and geopolitical tensions continue to shape markets, a more flexible, diversified investment approach is essential.
BlackRock’s call to action is clear: the old playbook doesn’t work anymore. The future belongs to investors who are willing to diversify deliberately and explore beyond the basics.