JPM likes 60/40..... but what about?

[MichealKnight]

This was on CNBC pro, but the following link is not paywall:

https://www.thinkadvisor.com/2022/11/08/best-outlook-for-investors-in-a-decade-jpmorgan/

"Portfolio Outlook Is the Best "Since 2010": JPMorgan's Kelly"

“Today, … opportunities for long-term investors with capital to deploy are the best we’ve seen since 2010,” the report continues. In fact, allowing for a 16% drop in 60/40 portfolio this year and assuming a consistent 7.2% yearly return, a balanced portfolio should recover in about three years, it explains."

“Our forecast annual return for a [U.S. dollar-denominated] 60/40 stock-bond portfolio over the next 10–15 years leaps from 4.30% last year to 7.20%. Over the last 25 years, the rolling 10-year return for this portfolio has averaged 6.10%,” the report states.

As someone whose "plan" needs 5-6% - of course, this sounds lovely.

But I have serious concerns and yes, the world always has ups and downs but let's look at the starting line-up on planet earth:

USA, Russia, Japan, China, Britain. Ok throw in some France and even some India.

And frankly - there's so much more negative than positive vis a vis relations between some of the players.....AND , well, internally - there's either glaring negatives within said nations, or quiet negatives within the nations. Anything from resource shortages, to internal tribalisms, to territorial grabbing plans, to subsequent abandoning of pacifist doctrines (see Japan - it's quietly happening). Oh - and this little thing called solvency be it for public debts, pension systems and to top it off.....if one thinks things are a bit tense now - I wonder what happens if many lose employment to inevitable A.I.

I am not criticizing nor endorsing any nation, political party, whatever. I'm just saying if an alien rocketed into earth and did an initial "Earth 101" social studies class...the little green guy may conclude that these aren't the regular geopolitical ebbs and flows but rather, have the makings of something more serious and grand.

Then on the other hand - I see Millennials and Gen Z'ers - HUGE populations still starting out to buy homes and cars. I see people in the BILLIONS - be it China, India - many of them still dont have a smartphone, and many may one day rise up the ladder to buy things, medicines, cars, drink a Coke whatever. Ditto Africa Infrastructures will be rebuilt.

So in that latter paragraph I see great reason to be optimistic for a slow and steady decent ROI. But geopolitically..... well, it's unsettling to say the least.

Does anyone see these same concerns? The opposite? Thanks for reading.

 

[razztazz]

In fact, allowing for a 16% drop in 60/40 portfolio this year and assuming a consistent 7.2% yearly return,

Yes, just assume. What could go wrong?

 

[Freedom56]

Things to to consider...

1- The era of zero interest rates is gone.
2- 5 year CDs return a fixed 5% with zero risk
3- A high grade corporate bond ladder will return 6% with capital protection
4- A high yield corporate bond ladder will return 8-9% per year with far less capital risk than bond or equity funds.

 

[Lsbcal]

Jump. The only question is backward or forward.

FWIW, I'm 60/40 now. My concerns are unemployment going up, SP500 off it's 12 month moving average by about -3%, and inverted yield curve (3month vs. 10year).

No way to determine how screwed up the world really is and how it reflects back into stocks and bonds. Nobody has a decent model. That gets back to unpredictability of large systems or even small systems. Thank Heisenberg for that.

 

[DJRR]

If you think the rest of world is really messed up, then I believe that is the best argument for the US markets. In the land of the blind, the one eyed man is king.

 

[COcheesehead]

I use the Fidelity retirement planner and change the allocations from time to time just to see “what if”. It tells me I can have as little as 15% in equities and still die with millions. FireCalc tells me I can have 0% in equities and have my plan work 100% of the time.
Figure out what works best for your level of comfort and then act on it.
Fixed income now vs the recent past is actually paying you something - likely more than equities will for awhile.

 

[OldShooter]

Do yourself a favor and quit reading that stuff. No one can predict the future.

 

[Markola]

^^^^ I agree with that. The best one can do, I believe, is diversify, keep investing costs low and maintain their asset allocation.

 

[OldShooter]

... It tells me I can have as little as 15% in equities and still die with millions. ...

Sorry to be picky, but what it is telling you is that under past market conditions this is the case. It knows nothing about future market conditions, hence the clear disclaimer on the FireCalc home page.

 

[Lsbcal]

Sorry to be picky, but what it is telling you is that under past market conditions this is the case. It knows nothing about future market conditions, hence the clear disclaimer on the FireCalc home page.

True but it does show that one probably does not need a big equity allocation under certain personal conditions of wealth. Also if we don't look at the past markets we are kind of flying dumb. We just have to use a degree of common sense and acknowledge that extremes could occur in markets.

 

[audreyh1]

^^^^ I agree with that. The best one can do, I believe, is diversify, keep investing costs low and maintain their asset allocation.

Yeah, pretty much.

Does anyone see these same concerns? The opposite? Thanks for reading.

There has been a giant geopolitical rollercoaster ever since I was born, and before that too!!! These days I pay little attention to it and worry about it even less - I have other priorities closer to home.

If you think the rest of world is really messed up, then I believe that is the best argument for the US markets. In the land of the blind, the one eyed man is king.

Yeah, that too!