Stock Market Insights: Investing has changed. Has your portfolio?

Joe Shearrer, CPFA,® is Vice President and Wealth Advisor at Fervent Wealth Management.

For decades, the 60/40 investment portfolio—60% stocks and 40% bonds—was considered a reliable long-term growth and stability formula. Financial advisors, pension funds and individual investors leaned on it as a time-tested standard. But in today's economic environment, many question whether the traditional 60/40 mix still holds up. Here's why this once-iconic strategy may no longer be good enough.

Bond yields are falling short

The 40% allocated to bonds was historically used to generate steady income and provide a buffer during stock market downturns. But that safety net has worn thin. Years of historically low interest rates followed by rapid rate hikes have created unusual volatility in the bond market. As rates rise, bond prices fall, and with inflation running high, the real return on bonds has often been negative. The income cushion investors once relied on is now far less dependable.

Stock market volatility is rising

Equities have always carried risk, but today's market is more complex and reactive than ever. Global economic shocks, political instability and rapid technological shifts can cause violent swings in stock prices. More concerning, the traditional negative correlation between stocks and bonds has weakened. In 2022, for example, both asset classes declined simultaneously, leaving even balanced portfolios exposed to steep losses.

Inflation Is reshaping investor needs

Inflation isn't just a short-term concern—it's a structural challenge that can erode purchasing power and investment returns. While bonds typically offer fixed interest payments, those payments lose value in an inflationary environment. The result? Portfolios that once felt conservative and well-balanced may now be at greater risk of underperforming.

Retirement durations are growing longer

As life expectancies rise, so does the need for investment portfolios to support longer retirements. The 60/40 model, while once sufficient, often lacks the growth engine needed to sustain withdrawals over 25 or 30 years. Today's retirees may need a more nuanced approach that factors in inflation protection, tax efficiency and flexible income strategies.

What's the alternative?

While the 60/40 model may still serve as a starting point, investors should consider expanding beyond it. Strategies might include:

·       Diversified alternatives: real estate, private credit, or infrastructure investments

·       Dividend-oriented equities: providing both income and growth potential

·       Inflation hedges: such as Treasury Inflation-Protected Securities (TIPS), commodities, or even certain energy assets

·       Tactical adjustments: actively shifting allocations in response to market trends

This doesn't mean abandoning the principles of diversification—it means adapting them to today's realities.

The 60/40 portfolio isn't necessarily obsolete, but it's no longer the one-size-fits-all solution it once was. In an age of greater uncertainty, longer retirements and diminished bond performance, investors should revisit their strategies and consider more flexible, forward-thinking approaches. If your investment plan hasn't evolved with the times, now may be the right moment to reevaluate your investment allocations.

Have a blessed week!

www.FerventWM.com

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

Opinions voiced above are for general information only and not intended as specific advice or recommendations for any person. All performance cited is historical and is no guarantee of future results. All indices are unmanaged and may not be invested directly.

The economic forecast outlined in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.