The end of the 60/40 portfolio
12 JUN, 2026
By David De Manuel from Exceliass
For decades, the 60/40 portfolio (60% equities and 40% bonds) has been considered a reliable framework for balanced investing. It offered a simple, elegant solution: equities for growth, bonds for stability and income.
This model worked exceptionally well in a disinflationary environment characterized by declining interest rates. Bonds not only provided income but also acted as a hedge against equity drawdowns. When equities fell, bond prices typically rose, cushioning portfolio losses.
Today, that dynamic is no longer guaranteed.
Rising inflation, higher interest rates, and increased market volatility have fundamentally altered the relationship between asset classes. Bonds can now lose value at the same time as equities, as seen in recent market episodes. The negative correlation that once underpinned the 60/40 model has weakened or even reversed.
As a result, the traditional balanced portfolio struggles to deliver on its original promise. It is exposed to simultaneous drawdowns across both core components, reducing its effectiveness as a risk management tool.
This is a shift we also actively observe in portfolio discussions at Exceliass, where traditional balanced allocations are increasingly being reassessed in light of today’s macroeconomic regime.
This does not mean that equities and bonds no longer have a role to play. Rather, it suggests that relying on a fixed allocation between the two is no longer sufficient.
Investors need to think beyond static models and incorporate more flexible, diversified approaches. This may include alternative strategies, inflation-linked assets, real assets, or more dynamic asset allocation frameworks.
The key shift is from a static balance to an adaptive one. In a more complex and uncertain macroeconomic environment, portfolio construction must evolve accordingly.
The 60/40 portfolio is not necessarily dead, but it is no longer enough.
