AAll good things don’t necessarily come to an end, but the 60% equity, 40% fixed income portfolio structure, which has been the cornerstone of investing for decades, may be. be on probation.
At the very least, evidence is mounting that the 60/40 model needs a facelift and could prove vulnerable to inflation, which is one of the main issues advisors and clients are thinking about today. hui. Advisors looking to refresh the 60/40 proposition may want to consider the Siegel WisdomTree Portfolios, which include two model portfolios, one of which has no exposure to bonds.
“WisdomTree worked with our Senior Investment Strategy Advisor, Dr. Jeremy Siegel, Professor of Finance at The Wharton School, to build portfolios designed to challenge the traditional 60/40 portfolio approach by enhancing profiles. current income generation and longevity. These portfolios include a global equity model and a multi-asset “longevity” model, ”WisdomTree said.
With inflation appearing to be more persistent than transient, advisers may want to evaluate the global equity model as it is fully allocated to equity-based stock exchange funds, indicating that it has some potential for fight against inflation. This is important because some on Wall Street think inflation will punish 60/40, especially the “40”.
“The recent synchronized sale of stocks and Treasuries was probably just the beginning of what happened to the popular 60/40 equity bond portfolio strategy, warn a growing chorus of Wall Street strategists.” , Lu Wang reported for Bloomberg. “Bank of America Corp. called “the end of the 60/40” while Goldman Sachs Group Inc. said losses from these portfolios could reach 10%. – the bond relationship can force fund managers to adjust their thinking.
Some strategists believe stocks will also be vulnerable to persistent inflation. There were signs of this in September when the S&P 500 fell on a monthly basis for just the second time this year.
“Now, with inflation fears raging, concern is that the Federal Reserve will seek to slow the economy and that rising rates will cause problems for bonds and stocks. September offered a taste of the pain, with a Bloomberg model following a 60% equity and 40% fixed income portfolio suffering the worst monthly drop since the start of the pandemic in early 2020, ”according to Bloomberg.
However, WisdomTree’s global equity model could prove to be sustainable as many of its components are dividend ETFs, including the WisdomTree US Mid Cap Dividend Fund (NYSEARCA: DON) and the WisdomTree US Small Cap Dividend Growth Fund (NasdaqGM: DGRS). DGRS and DON are dividend growth strategies, which is relevant in times of inflation as payment growth historically exceeds inflation.
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