How 60/40 Worked The Last Time Rates Were This High

Hedging equity exposure with bond investments did not work out as hoped last year. The S&P 500 fell by 19.4% and instead of moving opposite it in response to a flight to safety, the ICE BofA U.S. Bond Market Index declined by 3.8%.

As a result of the bond bear market, however, the benchmark ten-year U.S. Treasury bond’s yield has more than tripled from 1.50% at the beginning of 2022 to 4.65% as of November 9, 2023. Some commentators now suggest that a classic 60/40 portfolio (representing the respective percentage weightings of the two categories) constitutes a good strategy going forward. Perhaps so, but there is no guarantee against being disappointed.