Rising stagflation risks in the U.S. and Europe are raising the possibility of a “lost decade” for the 60/40 portfolio mix of stocks and bonds, historically seen as a reliable investing choice for those with moderate risk appetites.
Signs of stagflation worries are evident in rates markets. The 10-year U.S. breakeven inflation rate, a gauge of inflation expectations, has reached its highest level since the 1990s, according to Goldman Sachs. Meanwhile, inflation-adjusted real yields remain near their lowest levels in decades, reflecting pessimism about economic growth in coming years. And the widely followed spread between 2-year TMUBMUSD02Y, 1.
The lost decade envisioned by Goldman Sachs marks a turnabout from the last cycle, which benefited from what Mueller-Glissmann and colleagues call a “structural ‘Goldilocks’ regime.” That’s when low inflation and real rates boosted valuations and profit growth, despite relatively weak economic growth.
The following chart reflects 1-year and 10-year drawdowns in the 60/40 portfolio through the decades.
Sigh. Look, I’ll tell you what works Invest 10% of your Net income before any matches. Of that, 90% in ETF index (like SP500), 5% Bond ETF, 5% govt security. When 5 years from retirement keep that, invest 50/50 stock/bond ETF. That’s it. Stop panicking
Shouldn't we lose a year before we talk about a decade?
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