The 60/40 portfolio recently passed its first real test since the 2022 bond market rout, according to Morningstar. During the stock market sell-off in the first week of August, high-quality bonds did what they are supposed to do — play defense, said Jason Kephart, director of multi-asset ratings at Morningstar. The Morningstar U.S. Market Index, a yardstick for stocks, dropped 6.3% from Aug. 1 through Aug. 5, its worst five-day performance since June 2022. Meanwhile, the Morningstar U.S.
The consumer price index, which measures the price of goods and services, rose 0.2% in July, less than economists had expected. That put the 12-month inflation rate at 2.9%. "If inflation continues its current trajectory, you can count on bonds to be that reliable defense again," Kephart said. Building a 60/40 portfolio The 60/40 is really another word for a balanced, diversified portfolio, so allocations can shift depending on your age and retirement date, as well as individual needs.