Behind the Yield

Behind the Yield: September 18, 2025

The 60/40 Isn’t Dead

By Charles Urquhart, CFA · September 18, 2025

The 60/40 Isn’t Dead

The strategy isn’t broken—our ability to explain it is. - September 19, 2025

Every few years, headlines proclaim the death of the 60/40** portfolio. Market downturns spark predictions that the classic mix of 60% equities and 40% bonds can no longer deliver. In 2022, when both stocks and bonds fell together, obituaries for the model appeared quickly. Many argued the 60/40 was outdated, and those concerns have lingered into 2025.

But the 60/40 didn’t fail. What happened was unusual: a decade of near-zero rates and quantitative easing had muted the role of bonds, and when rates rose sharply in 2022, both asset classes declined at once. It was painful, but it was an anomaly — not a structural flaw. With yields now back in the 4% to 6% range, fixed income has regained its footing, and the balance at the heart of 60/40 has been restored.

How We Got Here

For much of the past decade, bonds took a backseat.

Yields remained near zero.

Quantitative easing kept markets flooded with liquidity.

Equities bore the entire weight of generating returns.

Bonds didn’t harm portfolios, but they didn’t contribute much either. In that context, it was easy to believe they no longer mattered.

Due to bonds being so quiet, many advisors ceased discussing them. Terms like duration, reinvestment, and yield curve fell out of common use. That wasn’t the root of 60/40’s challenges — it was a side effect of a period when bonds played a lesser role.

Then came 2022. Rates reset higher as stocks corrected, leading to a rare double drawdown. Headlines rushed to announce the model as “broken.” In truth, it was merely the unwinding of a decade of monetary distortion.

Why the 60/40 Still Works

The 60/40 portfolio has always been centered on balance, not perfection.

Stocks act as the growth engine. They provide long-term returns, but they also introduce volatility.

Bonds serve as the ballast. They stabilize the portfolio, generate income, and lower overall risk.

The model only seemed broken when bonds were momentarily stripped of their income-generating power in a zero-rate environment. That situation was the exception, not the standard. With yields now restored, bonds are again delivering both income and stability.

The 60/40 was never intended to yield outsized gains annually. It was crafted to keep portfolios balanced throughout cycles. That purpose remains intact.

The Real Problem: Misunderstanding the Forty

The real issue isn’t the model itself but how the “40” is understood. After a decade of low yields, many advisors fell out of practice explaining the role of fixed income. That gap in communication wasn’t the cause of the 60/40’s struggles, but it has made them harder to defend.

Clients today are more discerning. They can tell the difference between jargon and a clear explanation. What they want is confidence that their advisor understands how fixed income works in their portfolio. For advisors, those conversations are an opportunity to build trust — and failing to have them only feeds the myth that the 60/40 no longer works.

How to Bring Back the Forty

Reintroducing bonds doesn’t demand advanced trading skills. It requires conveying the fundamentals with confidence and context. Three areas stand out:

Simple Bond Math: Duration measures sensitivity to interest rates. For instance, a fund with a duration of six years will decline about six percent if rates increase by one percent. That can seem unsettling, but today’s higher coupon payments cushion the decline and, over time, compensate for it. Client translation: “Prices may dip, but the income you’re locking in continues to flow.”

Relative Value: The true skill is comparing bonds to one another. Treasuries, munis, and corporates each carry distinct yields, risks, and tax implications. Explaining why one option suits a client’s needs better than another demonstrates intentionality. Client translation: “Not all bonds are identical — we’re selecting the ones that best align with your objectives.”

Economic Indicators: Bonds are influenced by inflation, employment data, and Fed policy. Advisors don’t need to make predictions, but they should connect the dots in straightforward language. Turning headlines into context helps clients feel informed. Client translation: “The news may sound perplexing, but here’s what it signifies for your income and stability.”

The Takeaway

The 60/40 never broke. 2022 was the consequence of an extraordinary monetary environment, not evidence of structural failure. With yields normalized, bonds are once again offering what they’ve always been meant to provide: ballast.

The opportunity now lies with advisors. By reclaiming the language of bonds and explaining them simply, advisors can restore confidence in the model and in their own role. The 60/40 remains what it has always been — a dependable framework for balance.

At Fixed Income Resources, we don’t sell bonds or products. We sell time, perspective, and clarity so advisors can better serve their clients.*“

**40% fixed income” doesn’t just mean plain bonds. That allocation can include Treasuries, corporates, munis, TIPS, mortgage-backed securities, high yield, international debt, preferreds, bond ETFs, and even alternative credit. It’s a toolbox, not a single instrument.