The investors have been told for very long that 60% of the portfolio holdings should be in equities and there were 40% of the portfolio bonds which is a mix which provides more exposure to the stock returns which are historically superior while granting the diversification benefits and the lower risks which the fixed-income investments have.
However in a research note which had been published by the Bank of America Securities which had been given the title of “The End of 60/40” there have been suggestions of the portfolio strategists who argue that it is time to consider the roles of bonds in portfolios to allocate a bigger share towards the equities.
The relationship between the classes of assets has changed by an amount that a lot of investors now buy the equities not for the growth in future but for the income currently and the buy bonds which participate in the price rallies according to the portfolio strategies.
It cannot be denied that $339 billion of inflows to the bond funds all around the globe in the year 2019 as well as the $208 billion in the outflows form the equity funds globally highlight the power of the ongoing bonds rally which has caused the yields of the bonds to fall enough to make sure that there are 1,100 global stocks now which provide yields of dividends which are above the average yield of the government bonds globally.
As there is a slowdown in the global economic growth and the developed market economies age, the assets which had been considered safer traditionally like bonds have gained popularity leading to a creation of a bubble in the market of bonds which may derail the balance of equity and bonds.