Bond market sell-off: Rethinking the 60/40 portfolio

00:00 Speaker A

All of the volatility makes us think about the 60/40 portfolio and whether investors should be rethinking it a bit. Joining us now to discuss Jamila McCluney, Financial Advisor and Blackwell Foundation. We are joined now with her for the FA corner this week, sponsored by Invesco. Jamila, great to have you here. So I I want to talk to you about how investors should be approaching this idea of the 60/40 portfolio, given all of the volatility that we've seen in the bond market and also the stock market over the last week. What are you telling clients about that allocation?

00:53 Jamila McCluney

I think that's a great allocation to still look at. We're looking at equities being strong, and I believe investors are aware of the volatility that's just systemic and that could come at any moment from a tweet from the White House. So they know it's coming, they're prepared for it, they know what it feels like, and I believe they're able to stay strong in that 60/40 mix.

01:25 Speaker A

And it's interesting because Bank of America's Michael Hartnett this morning said that investors should actually look longer across the yield curve at something like the 30-year yield, for example, in 30-year treasuries. How are you thinking about allocating capital across the yield curve? Do you see more opportunity in those longer-dated treasuries?

01:54 Jamila McCluney

I believe the longer-term data does tell us something. We have the data to look back on. And I believe over time, you know, just that longer look will kind of pan out and give us a better estimate of what to expect just based off of the history of what we've seen in the past.

02:25 Speaker A

And my guest host, Cope Kane, has a question for you as well, Jamila.

02:31 Cope Kane

Good morning. It's great to be with you. I'm curious when you look at the consumer landscape, because we know that consumer spending ultimately impacts everybody else in the economy and in companies. What do you think consumers should be most concerned about with the tax bill?

02:56 Jamila McCluney

I think consumers will initially be excited with the tax cuts. I think they'll see spending based off of that, you know, when taxes go down, it frees up money. But I do believe there will be a delay and a little concern over time. The social programs are cutting there. The tax bill, over time, Moody's down rating the credit rating of the US. I think that ultimately what will look like an initial benefit overall may give consumers pause.

03:52 Speaker A

And when you say it'll give consumers pause, walk me through some of the questions that you are getting from clients and what they're asking you about what to do with their portfolios in a year with such volatility.

04:14 Jamila McCluney

Yeah, they want to know, you know, what's going on? Is there any type of preparation that they can do, should do? What sectors should they be looking to? Should they pull their money? Should they keep contributing to their 401k? There's a lot of fear and uncertainty in the market. And when you have data that comes out like tax cuts, people are excited about that. But when you look at interest rates that may go up as a result, or, like I said, the social programs being cut, the green tax incentives being cut, which was a major incentive for the solar and EVs, it's kind of scary on the other side. So it's like winners and losers, but where do we come out if we take advantage of the free money that we have, that we freed up in the spending that we're able to do? What does that look like over time later when some of that volatility begins to kick up?

05:18 Speaker A

And I think you mentioned this with the investors that you're speaking with and that you're helping, that they are really kind of settling into the market volatility. They're sort of used to now this chaotic cadence, and there are some areas of safety. And I think you've got some sectors that you have your eye on. What are those?

05:47 Jamila McCluney

I think gold looks strong, you know, for times when there's increased inflation or pressure of inflation, utilities. AI actually has been pretty strong and encouraging. So I think those sectors are things that clients are looking at to see how they can get in to diversify and kind of not have all their eggs in one basket.

06:19 Speaker A

Jamila, really appreciate you making the time for us this morning. Thank you so much.

06:26 Jamila McCluney

Thank you.

06:28 Speaker A

That was this week's FA corner, brought to you by Invesco.