The Traditional 60/40 Portfolio Reimagined
This is a snipet of a more extensive note on themacrobrief.substack.com
This trend of central banks accumulating higher gold reserves also holds true on a global basis.
This has huge implications for investors as foreign central banks hold lower US Treasury reserves vs higher gold reserves , it puts upwards pressure on US yields (Lower bond prices) and creates demand for gold resulting in higher gold prices.
The Macro Brief is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Traditional 60/40 portfolios are likely to suffer if this trend of replacing US Treasury reserves with gold continues.
Traditional 60/40 vs Modern 60/40 vs 60/20/20 Stocks, Bonds & Gold
Below are the results for a monthly investment strategy investing $250 a month from 1984 to today in both the traditional 60/40 stocks and bonds vs modern 60/40 stocks and gold and also a balanced approach which has 60/20/20 stocks, bonds and gold. The portfolio is rebalanced yearly.
The tailwind in bonds from a 40 year decline in interest rates contributed to long periods of outperformance for the traditional 60/40 portfolio, however the other two portfolios of modern 60/40 and 60/20/20 both produced marginally better performance.
Given the macro landscape developing from central banking behaviour and the uncertainty of inflation, interest rates, we could be entering a period where the modern 60/40 produces long periods of outperformance. Considering an allocation which diversifies bond holdings with gold could offer a lifeline for the traditional 60/40 and better prepare investors' portfolios to navigate the road ahead.
Whilst the traditional 60/40 stocks and bonds portfolio has been the portfolio of choice for the global trends of the last 40 years, the trends emerging for the decades ahead especially the reduction of foreign central bank holdings of US treasuries and the accumulation of gold as part of their balance sheet means that investors portfolios stand to benefit a great deal by considering a switch from the traditional 60/40 models, with the most likely beneficiary being gold.
Stay tuned for more insights on financial strategies, market trends and macro insights from The Macro Brief.
This trend of central banks accumulating higher gold reserves also holds true on a global basis.
This has huge implications for investors as foreign central banks hold lower US Treasury reserves vs higher gold reserves , it puts upwards pressure on US yields (Lower bond prices) and creates demand for gold resulting in higher gold prices.
The Macro Brief is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Traditional 60/40 portfolios are likely to suffer if this trend of replacing US Treasury reserves with gold continues.
Traditional 60/40 vs Modern 60/40 vs 60/20/20 Stocks, Bonds & Gold
Below are the results for a monthly investment strategy investing $250 a month from 1984 to today in both the traditional 60/40 stocks and bonds vs modern 60/40 stocks and gold and also a balanced approach which has 60/20/20 stocks, bonds and gold. The portfolio is rebalanced yearly.
The tailwind in bonds from a 40 year decline in interest rates contributed to long periods of outperformance for the traditional 60/40 portfolio, however the other two portfolios of modern 60/40 and 60/20/20 both produced marginally better performance.
Given the macro landscape developing from central banking behaviour and the uncertainty of inflation, interest rates, we could be entering a period where the modern 60/40 produces long periods of outperformance. Considering an allocation which diversifies bond holdings with gold could offer a lifeline for the traditional 60/40 and better prepare investors' portfolios to navigate the road ahead.
Whilst the traditional 60/40 stocks and bonds portfolio has been the portfolio of choice for the global trends of the last 40 years, the trends emerging for the decades ahead especially the reduction of foreign central bank holdings of US treasuries and the accumulation of gold as part of their balance sheet means that investors portfolios stand to benefit a great deal by considering a switch from the traditional 60/40 models, with the most likely beneficiary being gold.
Stay tuned for more insights on financial strategies, market trends and macro insights from The Macro Brief.