The 60-40 Portfolio Makes a Comeback

After a disastrous 2022, the "60-40" portfolio of stocks and bonds is up 28% so far this year, the best return since 1995

By
Bill McColl
Bill McColl
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Bill McColl has 25+ years of experience as a senior producer and writer for TV, radio, and digital media leading teams of anchors, reporters, and editors in creating news broadcasts, covering some of the most notable news stories of the time.

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Published May 19, 2023
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Key Takeaways

  • After a disastrous 2022, the "60/40" portfolio of stocks and bonds is up 28% so far this year, its best performance since 1995.
  • Last year marked the worst for the 60/40 portfolio since the Great Depression.
  • In a note to clients, Bank of America strategists advised investors sell stocks once the S&P 500 reaches 4,200, and cautioned against the Federal Reserve prematurely pausing interest rate hikes.

The traditional "60/40" investment strategy is making a comeback.

That’s according to strategists at Bank of America, who wrote in a note to clients that after a disastrous 2022, the portfolio of 60% stocks and 40% bonds has had a 28% jump so far this year, the best since 1995.

Still, they are advising that investors sell equities once the S&P 500 reaches 4,200.

BofA said that if the Federal Reserve "mistakenly" pauses raising interest rates because policymakers think inflation is easing, bond yields will reflect that by moving above 4%, and if that happens, "we most certainly ain’t seen [the] last Fed rate hike of this cycle." The strategists noted that "inflation shocks cause rate shocks, rate shocks cause bear markets, and bear markets cause recessions."

Annual Returns for 60/40 Portfolio

Bank of America Global Research

AI Bubble

They also warned that artificial intelligence (AI) is a "baby bubble," arguing that all bubbles start with easy money and end with rate increases. They added that the "new AI mania" will be inflationary.

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