Move on Over 60/40 Stock Bond Portfolio: Wall Street Embraces 60/20/20 Portfolio Using Gold As Hedge

[Redator]

There is a revolution happening in Wall Street’s guidance to investors on how to structure their portfolios—and it involves gold. Longstanding traditions are being upended as the U.S. Treasury bond market is losing favor as a safe haven. Instead, experts are pointing to gold as it’s replacement. The Morgan Stanley chief investment officer recently recommended a 60/20/20 portfolio that includes 20% gold is a more resilient hedge.

Major Wall Street Icons Urging Americans to Increase Gold Allocation

It’s not just Morgan Stanley. Billionaire Ray Dalio and founder of Bridgewater, one of the world’s largest hedge funds, recommends that everyday investors allocate as much as 15% of their portfolios to gold. Jeffrey Gundlach, known as Wall Street’s “Bond King” notably pointed to gold as his top investment idea today and said that investors allocating as much as 25% of their portfolios was “not excessive.” These are just a few of the major Wall Street icons urging investors to add more gold to their portfolios in 2025.

The 60/40 Stock/Bond Portfolio Can’t Protect Your Wealth as National Debt Balloons

The reason? The 60/40 portfolio is letting investors down. You may remember the dismal double-digit losses for both stocks and bonds in 2022. The 60/40 portfolio did not provide investors with any protection from a stock market crash.

Bottom line? A portfolio of stocks and bonds is no longer sufficient to protect and grow your assets in today’s changing climate.

Government debt numbers are climbing, not falling, leading J.P. Morgan’s chief global strategist David Kelly to put it bluntly: America is “going broke.” The U.S. currently owes more than $37.8 trillion with interest on the debt topping $1.2 trillion.

So, the U.S. is creating more paper money and printing more debt, and when a government floods the system with paper money, gold increases in value, while the paper money falls in value. That’s exactly what we are seeing today. The U.S. dollar is down; gold is up big.

The takeaway for investors?

Today is the time to make portfolio moves. Kelly said: “There is a danger that political choices lead to a faster deterioration in the federal finances, leading to a backup in long-term interest rates and a lower dollar. Based on current allocations and valuations alone, many investors should likely consider diversifying their portfolios by adding alternative assets and international stocks. The risk that we move from

going broke slowly to going broke quickly adds an important reason to make this move today.”

The Global Shift Away from the U.S. Dollar Impacts Treasuries

What’s more the bond market simply isn’t working as a hedge against stocks like it used to. One reason is that there isn’t as much global demand for U.S. dollar denominated assets like there used to be. Global central banks used to be major buyers of U.S. Treasuries as they put their dollar reserves into U.S. debt. The U.S. dollar’s role, however, has become less central to the global economy.

Over the past 11 years, central banks have stopped adding to their foreign exchange reserves. The U.S. dollar’s share of central bank global reserves, while still big, has shrunk to 58% from two-thirds a decade ago. Notably, in this same period, global central banks have been major buyers of gold.

More Inflation Ahead?

Inflation has yet to be vanquished and with concerns about the Federal Reserve retaining independence, there are rising worries that inflation could rise not fall in the years ahead. Notably, the 60/40 portfolio performed dismally during the 1970’s Great Inflation period.

From 1973-1974, the 60/40 portfolio delivered -11.95% return. Gold, meanwhile, surged 69% in that period, according to Morningstar Direct.

Getting Started

As you look to rebalance your portfolio, consider decreasing your exposure to bonds (which have largely been a losing asset) and increase your exposure to gold. The 60/20/20 stock/bond/gold portfolio is already becoming the new normal, and this gold rally has farther to go. Goldman Sachs recently upgraded it’s 2026 gold forecast to $4,900 an ounce. Societe Generale recently wrote in a research note that “Gold’s ascent to $5000 seems increasingly inevitable.” Bank of America recently hiked its 2026 forecast for gold to $5,000. If you buy gold today, and the precious metal climbs to $5,000 next year, you’d lock in a 21% gain from current levels.

Gold offers a proven hedge against inflation, paper currency devaluation, and geopolitical risks that can disrupt other asset classes. If you act today, you not only will protect your wealth but also position yourself to benefit from more upside in the gold rally ahead. Don’t wait for stock market conditions to worsen—seize the opportunity today to enhance your portfolio’s resilience and secure long-term growth with an increased allocation to gold.

The post Move on Over 60/40 Stock Bond Portfolio: Wall Street Embraces 60/20/20 Portfolio Using Gold As Hedge appeared first on Blanchard and Company.