Asset managers overseeing trillions of dollars are cautioning clients to take a defensive position heavy on bonds in the face of rising equity prices and the expectation that the Federal Reserve is increasingly unlikely to cut interest rates much further.
A key Vanguard model released as part of the $10tn asset manager’s 2025 outlook now calls for financial advisers and certain wealthy individual investors to allocate 38 per cent of their portfolios to stocks and the remainder to fixed income. That recommendation is down from 41 per cent for 2024 and 50 per cent for 2023, tantamount to flipping the popular 60/40 portfolio on its head.
“For that investor who is willing to take a little bit of active risk and deviate from their long-term policy portfolio, we think de-risking would make sense,” Todd Schlanger, a senior investment strategist at Vanguard, said in an interview.