Monthly Archives: October 2022

It’s Alive! – Is The 60-40 Portfolio Model Back?

Market Memo

October 2022 – By Kyle Rohrwasser

Just in time for Halloween, the 60-40 portfolio model has risen from the grave in just a few short months.  A 60/40 portfolio has long been an industry standard, representing 60% equities with a ballast of 40% fixed income.  Between October of 2018 and August 2020, we saw 10-year treasury rates drastically move down from 3.23% to 0.55%. That created a paradigm shift towards equity over fixed income. Fixed income prices move in the opposite direction of their yields.  As yields drop, prices increase, and vice versa.  This inverse relationship is known as Interest Rate Risk and is measured by a data point known as duration.  During the summer of 2020, with fixed income yields pressed lower, adding interest rate risk almost guaranteed losses in the event the Federal Reserve increased interest rates.  This had some analysts claiming the 60/40 portfolio was dead, as the ‘safe’ portion of the portfolio (fixed income) carried a high degree of interest rate risk while simultaneously paying very little yield.  This dynamic caused many investors to allocate even more to equities to compensate for the poor fundamentals within the fixed income market. 

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Series I Savings Bonds Update

Market Minute

October 2022 – Scott Rosenquist, CFA®

U.S. Treasury Series I Bonds will reset their interest rate next month leaving investors until the end of October to earn 9.62% for the following six months. The rate applied to I bonds is based on the month it was issued and will change every six months going forward. The current rate is attractive relative to other short-term savings options. As of now, estimates for the new interest rate appear lower than 9.62% but we will see in early November. The fixed rate component is currently zero, so the entire interest rate is based on the inflation component.

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