A Classic Makes a Comeback: The 60/40 Portfolio Could Be Effective for the First Time Since 2021

This year could be the first since 2021 in which stock and bond prices are moving in opposite directions in the traditional sense, according to data from the investment firm Leuthold, based on benchmarks for each of these asset classes, reports The Wall Street Journal (WSJ). This trend suggests that a 60/40 investment portfolio consisting of stocks and bonds is once again performing well for the first time in several years, the WSJ notes.

Despite the recent sell-off, financial advisors strongly recommend that investors consider bonds in order to generate attractive returns in the future. Their argument is based on the fact that, according to Leuthold data, bonds—at least by one metric—have begun to behave as expected for the first time in a long while. Specifically, this refers to their correlation with stocks. For the first time since 2021, these two asset classes have begun to move in opposite directions, as they traditionally do. This suggests that the 60/40 portfolio is starting to work again, notes the WSJ.

A classic 60/40 portfolio consists of 60% stocks and 40% bonds. For many decades, this structure smoothed out volatility and served as the benchmark for the balanced investor, since historically, one asset typically rose when the other fell. However, in recent years, the 60/40 portfolio has faced challenging times. The problems began in 2022, when high inflation and rising interest rates caused both stocks and bonds to fall simultaneously. Amid supply chain disruptions and geopolitical shocks, the inverse relationship between these two asset classes broke down. Although both stocks and bonds rose over the next three years, many investors sold off their bonds in favor of higher-yielding stocks, the WSJ notes. But now, according to the publication, the portfolio may regain its appeal—asset managers are once again advising clients to invest in bonds, an asset class that many market participants had come to despise.

A massive sell-off has continued in global government debt markets in recent months, and yields on U.S. Treasury bonds have reached their highest level in 24 years. Investor concerns are fueled, among other things, by: rising business activity in the U.S., the U.S. national debt exceeding $40 trillion, a rapid increase in spending on artificial intelligence, as well as high oil prices due to the war in the Middle East, which are fueling inflation and forcing market participants to bet that central banks, including the Federal Reserve, will continue to raise interest rates.

Bond sales this year have hurt the returns of existing bondholders. However, the WSJ notes that there are signs on the market that the situation is changing. According to Morningstar, inflows into bond funds since the beginning of 2026 have already exceeded the figures for any full year since 2021.

“The main challenge will be psychological. When people think about fixed returns, they’re mentally anchored to a time when rates were near zero, but we’re now in a completely different yield environment than we’ve seen over the past 15 years,” said Brian Spinelli, co-chief investment officer at wealth management firm Halbert Hargrove.

David Bush, Chief Investment Officer at Trajan Wealth, invests in bonds with maturities ranging from three to five years. He considers them a good alternative for those who hold significant amounts in money market funds, as these securities allow investors to lock in the current high yields.

Another approach is to create a “bond ladder,” in which investments are spread across bonds with progressively longer maturities, explained Collin Martin, head of fixed-income research and strategy at the Schwab Center for Financial Research. “Investing in bonds always carries the risk of falling prices. But [right now] we see an opportunity to generate income that hasn’t been available for nearly two decades,” he noted.

However, there is another perspective on the market: for instance, many consultants continue to point out the pitfalls of investing in bonds, the WSJ notes. Some of them fear that both the stock and bond markets have become too dependent on companies in the artificial intelligence sector. All of this increases the risk that these asset classes will continue to move in tandem.

According to data from Apollo Global Management, the 10 largest companies in the S&P 500 are primarily tied to technology and AI, and they account for 40% of the index. AI also accounts for 49% of new investment-grade bond issuances (launched since the beginning of the year). This underscores the importance of diversifying both stocks and bonds in a portfolio, according to Brent Wilsey, Chief Investment Officer at Wilsey Asset Management. “If you invest conservatively in food manufacturers and transportation companies—reliable businesses that will grow no matter what—you’ll be just fine,” he said.

This article was AI-translated and verified by a human editor