Revisiting Diversification and the 60-40 PortfolioRevisitingDiversificationandthe60-40Portfolio

The technology sector continued to play a starring role in powering the S&P 500 to new record highs this week, highlighted by Nvidia’s rise to the top of the market capitalization charts in the US on Tuesday. Meanwhile, investors have also shown a growing appetite for fixed income with bond funds recording additional inflows in May, according to Morningstar data published on Monday. The broad market selloff of 2022 saw stocks and bonds fall in tandem, and the traditional 60-40 portfolio may have lost some of its luster after suffering one of its worst years on record. However, in the long run, allocating across a diverse mix of assets could be crucial.

With uncertainty becoming a prevailing theme in financial markets and the global economy, focusing on the benefits of diversification could prove valuable for investors. Stocks, bonds and alternatives each offer investors opportunities to construct a portfolio that is diversified not only in its asset classes, but its sectors, geographies and liquidity profile. A new episode of The Outthinking Investor podcast takes a closer look at asset allocation strategies and the future of diversification, featuring guests Lorne Johnson, Head of Multi-Asset Portfolio Design at PGIM Quantitative Solutions, and Antti Ilmanen, Global Co-Head of the Portfolio Solutions Group at AQR Capital Management.