JPMorgan Says 60/40 Portfolio Far From Dead, Set to Trounce Cash

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Advisor Perspectives
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The popular 60/40 portfolio isn’t dead, and in fact is a significantly more compelling investment than cash over the coming decade, according to JPMorgan Asset Management.

The strategy of putting 60% of assets in equities and 40% in Treasuries is set to outperform cash by an annualized 4.1 percentage points, and inflation by 4.5 percentage points, over the next 10 years, strategists at the money manager said in a report looking ahead to the state of capital markets in 2024. That’s even with money-market funds paying upwards of 5% these days, they noted.

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The endorsement comes as the time-honored portfolio has faced a growing number of critics following its worst performance since the global financial crisis last year. More recently, a Bloomberg gauge of the 60/40 model has slumped roughly 4% since July as turmoil in Treasuries has fueled synchronized sell-offs in stocks and bonds, sending investors scrambling for safer assets.

“Why should I extend out of cash?” is the No. 1 question JPMorgan’s money managers get from clients, Monica Issar, global head of multi asset and portfolio solutions at JP Morgan Global Wealth Management, said at a round-table on Tuesday. But with the cash rate peaking and expected to hover around 2% to 2.5% over the next five to 10 years, other assets will offer more compelling returns, she said.

60/40 Portfolio

Still, the long-term promise of the 60/40 portfolio isn’t stopping JPMorgan from recommending a slew of alternative investment options to juice returns, especially with stock-bond correlations no longer reliably negative.

By supplementing the traditional asset mix with a 25% allocation to alternatives — including private equity, real estate and commercial mortgage loans — investors can boost their returns by an additional 0.6% percentage points annually over the next decade, while also reducing risk.

Read the full article here by Isabelle Lee of Bloomberg News, Advisor Perspectives

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