A long time ago, in the halcyon days before the Great Financial Crisis and the flood of cheap money from central banks that followed in its wake, prudent investors were advised to use a 60/40 portfolio model as an ideal balance for generating decent total returns with reduced volatility.

The 60% of their assets invested in stock markets provided potential for strong performance, while the balance in fixed interest holdings would step in to bolster returns when equity markets were falling. If equities outperformed and the 60% started to creep up, the portfolio was rebalanced to maintain that ‘optimal’ ratio.

And for many years it worked well. But quantitative easing and the rock-bottom interest rates that accompanied it put a massive spanner in the works, triggering a prolonged bull market for equities and at the same time suppressing bond yields to a fraction of their historic levels.

Investors with 60/40 portfolio models saw diminishing attraction in buying expensive bonds with minimal yields, especially when to do so meant selling high-performing equities. It’s unsurprising, then, that many have turned away from bonds as the bedrock of a balanced portfolio in recent years.

But 2022’s complex inflationary pressures – rooted in the fallout from the Covid pandemic and exacerbated by war in Ukraine – have caused turbulence across the board.

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