Is the 60/40 portfolio back? If you ask Gargi Pal Chaudhuri, BlackRock’s chief investment and portfolio strategist for its Americas division, the answer is yes — at least for now.
For decades, an allocation of 60% stocks and 40% bonds has been a cornerstone of portfolio construction.
Your stock allocation would handle the growth, while the bond allocation would play defense by locking in a steady return and promising the chance to sell for a profit if the stock market went through a rough patch.
But in 2022, the strategy didn’t work. Inflation soared, causing the Federal Reserve to hike rates, torpedoing stocks. At the same time, long-term bond yields rose to match inflation expectations, crushing the value of bonds bought at lower interest rates. In other words, stocks and bonds sold off simultaneously, leaving portfolios in tatters.
The same thing happened in early 2025. As President Donald Trump launched an ambitious trade war, rising inflation concerns pushed up bond yields and tanked stocks. Morningstar pointed out that it was the worst stretch for the 60/40 in 150 years.
However, those days should be behind us now, Chaudhuri says. While she’s bullish on the equity market in 2026, investors should once again be able to count on bonds as a hedge if things don’t work out for stocks.
“If we do see a shock, we think bonds can be that protection or that balance,” Chaudhuri told Business Insider on Monday.
One reason for that is that interest rates are starting the year higher than they were in 2022, giving them room to move lower. The Fed is also slashing interest rates, whereas it had been hiking them a few years ago. This has pushed the correlation between stocks and long-end bonds back into negative territory, where they move in different directions.
As for where to put your money in the bond market, Chaudhuri said she likes the middle of the yield curve, where investors can still find attractive yields without having to necessarily take on the duration risk associated with the longer end of the curve.
“We do think if you are allocated to that five-year part of the yield curve or even that 10-year part of the yield curve, you do have that negative correlation that’s coming back, which we think can be a big difference, especially from previous sell-offs like in 2022 and 2025, she said.
Meanwhile, in stocks, Chaudhuri said the value factor is attractive.
“We don’t think this is the end of the AI trade by any means, but one way in which we’re talking about things a little differently in 2026 is there are opportunities beyond AI,” Chaudhuri said.
She continued: “If you just look at a stand alone basis of what you’re getting in terms of earnings growth in that value sector, you’re getting about a 12% expectation in earnings growth.”
Examples of funds that offer exposure to the trades above include the Schwab Intermediate-Term U.S. Treasury ETF (SCHR), the iShares 3-7 Year Treasury Bond ETF (IEI), the Vanguard Value ETF (VTV), and the iShares MSCI USA Value Factor ETF (VLUE).
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