60% stocks, 40% bonds? Ha!
So much for the conventional wisdom of the “balanced portfolio”
by Bob Stokes
Updated: December 06, 2022
In his February 2022 book, Last Chance to Conquer the Crash, Robert Prechter said:
Countless advisors have counseled "diversification," a "balanced portfolio" and other end-all solutions to the problem of allocating your investments. These approaches are delusional... No investment strategy will provide stability forever.
That certainly has applied to the classic 60% stocks / 40% bonds portfolio this year.
On Oct. 14, a Reuters headline said:
'60/40' Portfolios Are Facing Worst Returns in 100 Years: BofA
Of course, everyone knows that stocks are risky, but many investors expect bonds to provide a cushion in case equities slide into a downtrend. And, indeed, the stock market has been trending lower since January.
But bond prices have taken a hit, too. A BIG one. As you probably know, bonds prices decline when yields rise and that's what's taken place.
You may find it hard to believe, but Elliott wave patterns and sentiment readings in the bond markets warned of this. For example, our July 2021 Elliott Wave Theorist showed this chart and said:
U.S. Treasury bill rates have edged closer and closer to zero for over a year. The complacency about the nonexistent T-bill yield in the face of unprecedented inflating by the government and the Fed is truly amazing... The Fed's cavalier inflating is borne of optimism... When optimism and complacency finally melt like popsicles in the sun, the lines in [the chart] will turn up.
During that same month / year (July 2021), The New York Times ran this headline:
Federal Reserve Officials Project Rate Increases in 2023 [emphasis added]
This next chart of the 6-month U.S. Treasury bill yield, which published in our Nov. 18, 2022 Elliott Wave Theorist, shows what we all know: Rates began to turn up more than a year before 2023 and then soared higher.
The question now is: What's next?
Elliott wave analysis answered this question before, and it can help you answer it now.
Get our updated outlook for bonds, stocks, gold, silver, the U.S. dollar, the U.S. economy and more as you follow the link below.
You Can See the Elliott Waves Unfold in Major U.S. Financial Markets
That's right -- the chart patterns of stocks, bonds, the greenback, gold and silver -- are all telling a story that you need to know.
Anticipate high-confidence turns in these markets -- before they happen!
The just-published December Elliott Wave Financial Forecast helps you do just that.
Follow the link below to learn more now.
The price of the U.S. "long bond," the 30-year Treasuries, is down 50% since 2020. The corresponding rise in interest rates has been reshaping the financial landscape. When might interest rates come down? Watch Market Trek host Brian Whitmer give a one-of-a-kind, Elliott wave-based explanation that has nothing to do with the Fed or economy.
The market for zero-day options is so hot that an exchange-traded fund has been created. Yet, this casino-style action will likely result in even more billions being lost. Even so, these two charts reveal that many speculators are reveling in high risk.
Just over 100 years ago Argentina was one of the world's most prosperous countries. How things have changed... Now that Argentina has a flamboyant new president, what does social mood suggest for the country next? The editor of our Global Rates & Money Flows service Murray Gunn shares his thoughts.