A traditional investment strategy, the 60/40 portfolio—consisting of 60% stocks and 40% bonds—has seen a resurgence of interest, especially as the financial landscape shifts. Once a staple among retail investors, this balanced approach fell out of favor as prolonged low interest rates rendered fixed income less appealing. The strategy particularly lost credibility in 2022 when both stock and bond markets declined simultaneously, shaking investor confidence in what was intended as a stable, uncorrelated investment method.
However, signs of a turnaround are emerging. In 2025, the iShares Core U.S. Aggregate Bond ETF (AGG) reported a total return of 7.2%, marking its best performance since 2020. This rebound has reignited discussions about the role of fixed income in portfolios, suggesting that bonds might offer offensive opportunities alongside their traditional defensive role. Philip Blancato, chief market strategist at Osaic, emphasized that the ongoing developments could render the 60/40 allocation appealing again, particularly during periods of monetary easing.
Current performance reveals that the S&P 500 has increased by 1.8% on a price basis, while the AGG has seen a more modest rise of 0.3%. Observers believe the outlook for bonds is increasingly favorable as interest rate cuts are likely to boost bond prices. Additionally, concerns regarding high valuations in the stock market, along with potential risks associated with an artificial intelligence bubble, may lead investors to lean more heavily on fixed income as a stabilizing force.
Blancato recommends simplicity in approach, advising investors to consider bond market proxies like the AGG ETF and suggests aiming for durations of six to seven years, as these tend to have higher sensitivity to interest rate fluctuations. He proposes a balanced allocation between credit and Treasurys, while also considering mortgage-backed securities for added diversity in the fixed income segment. “When the 60/40 worked for so long, there is this opportunity to be in that portfolio, get great return, and by the same token, not have to take a lot of risk to do it,” he stated.
While some experts advocate for sticking closely to this traditional allocation, others call for broader considerations within the 40% fixed income segment. Alternative investments such as private credit and commodities like gold are being discussed as potential additions to a modernized allocation strategy. Commodities have seen a resurgence of interest among retail traders as a hedge against market volatility, with metals like gold, silver, and copper experiencing significant gains at the start of the year.
Rick Pederson, chief strategy officer at Bow River Capital, acknowledged the merits of the 60/40 portfolio but suggested a need for a more diverse approach within the fixed income allocation. He noted, “I’m thinking that 60/40 isn’t bad, but I would probably do the 40% differently than some others.”
Overall, the renewed interest in the 60/40 strategy indicates changing market dynamics and investor sentiment, suggesting that what was once seen as outdated may now hold significant potential for those seeking a balanced approach to investment. As Blancato aptly put it, “What’s old is new again.”
