President Trump’s sledgehammer approach to global trade may be reviving one of Wall Street’s most trusted portfolio strategies: 60/40.
“Trump is making the ‘60/40’ portfolio great again by bringing back the negative correlation between stocks and bonds,” economist Alex Krüger wrote, pointing to rising stock values alongside falling bond prices.
“Very important for portfolio construction going forward,” he added.
For more than seven decades, the 60/40 portfolio — a mix of 60% equities and 40% bonds — was considered the gold standard for balancing risk and return.
The idea was simple: stocks drive long-term gains, while bonds cushion the blow when equities tumble. But that balance broke down after Covid, when stocks and bonds began moving in the same direction.
Now, with Trump back in the White House, the inverse correlation between stocks and bonds appears to be returning — restoring bonds’ role as a potential safe haven when markets turn volatile.
“If the elections have you jumpy and disoriented, the easiest solution might be a version of the classic 60/40 portfolio,” wrote Bloomberg columnist and CFA charterholder Jonathan Levin after Trump’s November win.
Analysts at Pimco second Levin's view, arguing that “the inverse correlation between bonds and stocks has returned” since Trump’s re-election.
Not set-it-and-forget-it strategy
The first two months of Trump’s second term have been a roller coaster ride for stocks, bonds and the economy.
The Atlanta Fed’s GDP tracker is projecting a sharp contraction in Q1, and the Fed has put interest rate cuts on pause due to inflation concerns tied to Trump’s new tariff policies.
So, while 60/40 may continue to offer diversification benefits, investors shouldn’t treat it as a given in every scenario, according to Jim Caron, CIO at Morgan Stanley Investment Management.
“You should think of it as an active process,” Caron said. “It’s not that 60/40 is the golden ratio — it could vary.” His current mix: 55% stocks, 45% bonds.
While that may seem like splitting hairs, it reflects a broader mindset shift as investors take a more active approach to investing in the face of policy uncertainty.
Still, business leaders and economists largely believe Trump 2.0 could be good for the economy — and by extension, for equities. As BMO Private Wealth strategist Carol Schleif put it, there’s reason to feel “nauseously optimistic” about the rest of 2025.
The nausea stems from the unpredictability. The optimism stems from faith that the market can still power through.
If that holds, the 60/40 strategy may remain relevant — not because it’s old-fashioned, but because it works.
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