[Nuggets] The 60/40 Portfolio Is Breaking Down...

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John here, with a quick update:

This just in from the International Monetary Fund:

Stock-Bond Diversification Offers Less Protection From Market Sell-Offs.

We’ve been monitoring this trend for a good while: In the old days (like, six years ago), investors could rely on mixing a judicious amount of bonds into a stock-heavy portfolio to meaningfully cut overall volatility without sacrificing much in terms of expected return.

That’s how advisors put millions of people into a 60-40 portfolio: When the stock market throws a temper tantrum, as it does every decade or so, the bond section of the portfolio holds steady.

Not anymore. 

But gold is a different story:

Data compiled by the World Gold Council shows that since 1971, gold has exhibited low to negative correlation with both U.S. equities and Treasuries over full market cycles. During major equity drawdowns—including 2000–2002 and 2008—gold provided positive returns while stocks declined.

In fact, gold has exhibited strength precisely when investors needed it most.

Stools need three legs to be stable. Not two.

If you’re currently sitting on a stock/bond-heavy portfolio, you need to consider a third leg. Something that will provide support when the other two legs are running into trouble at the same time… as stocks and bonds are increasingly wont to do.

Gold is a natural choice for that third leg.

Thanks for reading, and stay tuned for more! 
All the best,

—

John E.
Wealth Money Catalyst