Is Now the Time To Load Up on Bonds? Vanguard Thinks So

Core Viewpoint - The 60/40 portfolio strategy, traditionally consisting of 60% stocks and 40% bonds, is being reconsidered, with suggestions to potentially shift towards a higher bond allocation due to favorable bond yields and concerns over stock valuations [1][2]. Group 1: Market Context - The 10-year Treasury yield is currently at 4.2%, providing a real yield for bond investors for the first time in nearly a decade [1]. - Following the 2008 Global Financial Crisis, Treasury yields remained low, further declining during the COVID-19 pandemic, but have risen significantly due to aggressive Federal Reserve rate hikes in response to soaring inflation [3]. - The S&P 500 has increased approximately 90% since the bull market began in October 2022, driven by substantial investments in artificial intelligence [4]. Group 2: Investment Outlook - There are concerns that U.S. stocks have been overvalued, leading to expectations that returns on stocks and bonds may be comparable over the next decade, with mid-single-digit stock returns predicted by Vanguard [5]. - Recent market performance has shown a decline in stocks, with the S&P 500 and Nasdaq down about 2.5% and 4.5% respectively over a three-day period, while bond prices have remained stable and surged on a particular day [6]. - Vanguard is advising clients to consider allocating more than 50% of their portfolios to bonds, citing elevated stock valuations and potential risks associated with AI investments [8].