Don’t stop thinking about tomorrow

Sticking to a static allocation between equities and bonds of 60/40 has resulted in very different outcomes in different decades. For the next decade we see a number of challenges for static 60/40 portfolios:

  • We expect significantly lower returns in these two narrow asset classes over the longer term
  • Correlations between asset classes and relationships to the phase of the economic cycle are likely to become less stable as a result of the significant fiscal stimulus that has been provided to combat the economic effects of Covid-19
  • Uncertainty abounds, requiring investment hedges to protect the portfolio against detrimental scenarios and is something that cannot be achieved with just two asset classes.

Looking back at the past is a necessary exercise, but investors should not stop thinking about tomorrow.  

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.