Maduro's collapse is a threat to the 60/40 portfolio, strategists say. What do they advise buying?
The capture of the Venezuelan president by the Americans in early January was one of the momentous events that could spell the end of the classic investment portfolio consisting of 60% stocks and 40% bonds, according to strategists at brokerage firm Strategas.
How Maduro's capture resembles the assassination of Franz Ferdinand
Events in Caracas over the weekend showed that investors need to reflect a new, dominant paradigm in their portfolios: deglobalization, strategists write in a January 5 research note cited by Market Watch. The Strategas team compares Nicolas Maduro's seizure of power to the assassination of Archduke Franz Ferdinand in 1914, which triggered World War I, and Russia's invasion of Ukraine in 2022. Investors should view the US actions in Venezuela as a "point of no return," symbolizing a "final breakdown" of trust in the international legal system, alliances between sovereign states, and previously accepted guarantees, the strategists write.
"This is not the end of capitalism, democracy, or markets. It is the end of the illusion that they function the same way across space and time," they note in the memo. "Deglobalization reveals what has always been true: some countries, companies, people, etc. act in the interests of stronger powers that have the ability to distribute their favor and defend it; others do not."
Investors who continue to allocate capital based on the assumption that traditional geopolitical alliances, cheap energy, unlimited resources, and liquidity will remain unchanged are likely underestimating the risks, writes the Strategas team. "Those who adapt to a world of fragmentation, constraints, and spatial distribution of power are likely to fare better," they conclude.
What strategists recommend
Strategas advises increasing the share of alternative investments, distributing assets approximately as follows: 60% in stocks, 30% in bonds, and 10% in gold and various commodities. Investors who are willing to take risks for aggressive growth can increase the share of commodities in their portfolio to 17%.
Strategas managers themselves are increasing the share of gold, silver, and copper in their portfolios. "Commodities are once again becoming instruments of power," their note says.
This article was AI-translated and verified by a human editor
