Tough macroeconomic conditions will continue to put pressure on traditional equity-bond portfolios this year, some investors have warned, after last year’s gruelling market ride in which both asset classes plunged in tandem.
Portfolios which comprise 60 per cent stocks and 40 per cent bonds lost 17 per cent in 2022, according to BlackRock, their worst performance since at least 1999. That undermined a formula at the cornerstone of asset allocation for more than 30 years.
The inverse correlation between bonds and equities — the assumption that when the price of one rises the other falls — has helped balance portfolios since the 1980s. Investors have used the 60/40 split as a guide through decades of low volatility known as the Great Moderation. Returns for 60/40 portfolios averaged around 7 per cent between 1999 and 2022, according to BlackRock.