Happy New Year, and welcome to 2025! As we navigate the early days of this year, there’s a lot of chatter among analysts about the possibility of a market downturn. The factors driving these concerns include high interest rates, a slowdown in global growth, and ongoing geopolitical tensions. On top of all that, we have the U.S. presidential election shaking things up, with Donald Trump stepping back into the role of President, adding an extra layer of uncertainty and volatility to the financial markets.
In response to these turbulent times, some experts are advocating for the use of alternative investment strategies. These include diversified models like the All-Weather Portfolio, which are designed to safeguard against market swings. While these innovative strategies certainly have their merits, my goal in this piece is to show, through data-driven analysis, why the classic 60/40 allocation of stocks and bonds still stands strong as a credible and effective approach.
To explore this, we’ll dive into a backtest comparison of both the All-Weather Portfolio and the 60/40 allocation across three distinct periods:
1. From January 2000 to April 2009, often referred to as the “lost decade”
2. From April 2009 to December 2024, known for being the best bull run
3. From January 1995 to December 2024, following a buy-and-hold strategy over 30 years
Starting with January 2000…
