Investing: Why the 60/40 portfolio just isn't working right now
ARTICLE SUMMARY
The traditional 60/40 portfolio allocation is struggling in current market conditions similar to 2022, with Jim Carroll stating, "We have not believed the 60/40 was the right strategic asset allocation for a long time. There's a lot more available than simple stocks and bonds these days."
Jim Carroll recommends alternative allocation models like "50/20/20, 50/25/25, or even a 60/20/20" that incorporate less correlated investments, noting portfolio structure "obviously varies by investor, right? Younger people can take on more long-term risk than some of our older, closer to retirement or in retirement clients."
Ballast Rock is using buffered ETFs "to give us protection on the downside while allowing participation in the upside" and incorporating private market vehicles including "private equity secondaries, which we think have a tailwind, particularly with endowments like Harvard and Yale getting rid of some of their private equity exposure."
Despite recent positive market signals, Jim remains cautious about the economic impact of tariffs: "We're concerned that the impact of the tariffs really hasn't been seen yet in earnings... if we're not in a recession, we're certainly going to see some recessionary outcomes from the tariffs. So we think it's a time to take a breath."