The traditional 60/40 portfolio blend of stocks and bonds is not what's best for the current market environment, said Wells Fargo, emphasizing commodities as a diversification tool.
"We bring this up because 2022, if it continues on its current path, could be one of those rare years when both stocks and bonds are down. So far in 2022, a 60%-40% blend of the S&P 500 Index and the Bloomberg U.S. Aggregate Bond Index has a -25.97% annualized total return, second-worst only to 1932," said Wells Fargo's head of real asset strategy John LaForge.
"Commodity prices performed well in 2021, similar to stocks and bonds, and we expect strong commodity performance in the future," LaForge wrote in a note this week. "There are many types of investment portfolios, as investors' circumstances and goals are different. That said, most investment portfolios are a mixture of stocks and bonds. History suggests that combining these two asset classes can lower portfolio volatility, while providing strong risk-adjusted returns," LaForge described.