60/40 Portfolio Faces 'Lost Decade' After Worst Year Since 2008 Crisis

The 60/40 portfolio, meant to protect against declines, lost 16% in 2022. It invests 60% in stocks and 40% in bonds.

Goldman Sachs says the portfolio has fallen another 7% since summer. They warn of a "lost decade" ahead.

In 2021, Goldman said the 60/40 was at risk due to high valuations and inflation. Valuations have improved some but are still high.

The Shiller P/E ratio, which smooths earnings over 10 years, is higher than at prior 60/40 drawdown troughs.

Goldman's models show continued high risk of 60/40 drawdowns and low likelihood of a strong rebound.