Why I Abandoned 60/40—and You Should Too

The death of the “easy button” portfolio strategy

For decades, the 60/40 portfolio (60% stocks, 40% bonds) was gospel.

It promised:

• Long-term growth from equities
  
• Safety and income from bonds
  
• Low volatility through diversification.
  

And it worked—in a world of falling interest rates, tame inflation, and central banks ready to cut rates at the first sign of stress.

That world is gone.

What Changed?

1. Bonds No Longer Hedge Stocks

Bonds used to protect you when stocks fell. Not anymore.

In 2022, both asset classes dropped—marking the worst year for 60/40 portfolios since 1937.

📉 The S&P 500 fell 19%

📉 The Bloomberg U.S. Aggregate Bond Index fell 13%

Pre-2000, the stock-bond correlation was 78% positive and bonds did not hedge stocks reliably.

2000-2020, a period of low interest rates and low inflation, saw reliable stock-bond negative correlation—the hedge worked well.

Since 2020, the correlation switched.

Why? Because rising inflation hurts both stocks and bonds. Your portfolio wasn’t diversified—it was doubly exposed.

2. Yields Are Back, But So Is Risk

Today, bond yields are above 5%. That sounds attractive… until you realize:

• They’re competing with inflation
  
• Duration risk is massive when the Fed is data-dependent
  
• Government debt is exploding
  

And if rates stay elevated? Bond prices suffer.

If rates drop because of recession? Stocks will tank.

You’re cornered either way.

3. Market Concentration = Fragility

60% stocks means 60% exposure to… what, exactly?

Seven stocks (Apple, Nvidia, Microsoft, Amazon, Google, Meta, Tesla) now make up over 30% of the S&P 500. You’re not buying the “market.” You’re buying tech, leverage, and hype.

Diversified? Not really.

What I Do Instead: The 30/30/30/10 Portfolio

To adapt, I’ve restructured how I allocate capital to four categories:

• Cash-Short-term fixed income
  Wait and see while earning a decent return—T-Bill and chill
  
  
• Stocks
  Trend following, S&P 500 mostly, because my approach is top-down macro rather than bottom-up fundamental.
  
  
• Precious Metals
  Primarily gold with a smaller allocation to silver and to miners. This is a strategy designed to reflect themes of a declining USD, structural shifts in geopolitics and the ongoing monetary debasement pursued by most central banks.
  
  
• Crypto
  All Bitcoin, because I don’t understand/follow any other crypto. This asset class is maturing, with increasing institutional participation and has some of the same themes as precious metals.
  
  
• This allocation shifts based on a number of factors (see below):
  
  • The macro regime
  • Volatility
  • Momentum

The allocation ought not to move a lot—maybe once or twice a month. The simplicity of having only four categories makes it easy to follow.

This mix isn’t perfect—but it’s adaptable. It lets me pivot based on what actually moves markets: energy, policy, inflation, geopolitics, volatility and momentum.

‍

The Takeaway

60/40 was the autopilot portfolio for a world that no longer exists.

If you’re still using it, you’re not diversified. You’re exposed.

Now is the time to think deeply about your portfolio.

• What assumptions are baked into it?
  
• What risks are you not seeing?
  
• What’s your real exposure to inflation, policy, and volatility?

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