Vanguard says the outlook for the 60/40 model is looking rosier, but here’s the asset allocation it prefers the most

It’s still jaw-dropping to look at the chart of asset performance in 2022. The dot for 2022 is way over to the left — that is, signaling a year in which both stocks and bonds plummeted in value.

Analysts at Vanguard say, not to worry — they still think 2022 was just an aberration. “This breakdown in correlation was disconcerting for many investors and led some to question whether the 60% stock/40% bond portfolio still had merit as an investment tool,” says Roger Aliaga-Diaz, head of portfolio construction. “Our research finds that correlations can move aggressively over shorter investment horizons but that it would take long periods of consistently high inflation for long-term correlation measures—those that more meaningfully affect portfolio outcomes—to turn positive.”

And even hawks like Minneapolis Fed President Neel Kashkari say there are tentative signs that inflation has peaked. Data out of Italy on Thursday morning reinforced that view.

According to Vanguard, the nosedive in asset prices last year has raised expectations for performance over the next decade, “because yields on developed-market sovereign debt are the foundation on which other risky returns are built,” he says. The balanced portfolio, he says, still offers the best chance of success.


As the chart shows, however, its model for asset allocation has more of a tilt towards bonds and emerging markets than a conventional 60/40 model. It’s a 50-50 model between stocks and fixed income, including 10% for emerging market stocks.

The market

US stock futures ES00

turned higher in choppy trade. Crude oil futures CL
gained ground, while the yield on the 10-year Treasury BX:TMUBMUSD10Y
was 3.69%.

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The buzz

The US economic calendar includes the ADP private-sector payrolls report, weekly jobless claims and trade data, while St. Louis Fed President James Bullard is due to deliver a speech at 1:10 pm Eastern after hawkish Federal Reserve minutes were released on Wednesday. AMZN
said its layoffs will total more than 18,000 employeesmostly in its corporate ranks, in retail and recruiting in particular.

Exxon Mobil XOM
late Wednesday gave an update on fourth-quarter performance, that analysts at RBC Capital Markets say imply earnings per share modestly below consensus expectations.

Tesla TSLA
saw its Chinese deliveries drop 21% year-over-year in December.

Western Digital WDC
shares rose in premarket trade after Bloomberg reported it’s restarted merger talks with Kioxia Holdings.

Silvergate Capital YES
shares tumbled 25% as the crypto-focused bank said total deposits from digital asset customers declined to $3.8 billion at the end of the year from $11.9 billionand that it was reducing 40% of its workforce.

The Consumer Electronics show officially kicks off Thursday.

The House of Representatives is back in action at noon Eastern after six rounds of voting that so far have not seen Rep. Kevin McCarthy became speaker.

Best of the web

Technically, there was a Santa Claus rallyalthough not much of one.

Here’s how the Pennsylvania House resolved its impasse over picking a speaker.

The Catholic Church conducted a historic funeral for Pope Emeritus Benedict XVIwith a mix of ancient rituals and new precedents.

Top tickers

Here were the most active stock-market tickers as of 6 am Eastern.


Security name




Mullen Automotive





AMC Entertainment






AMC Entertainment preferred




Bed Bath & Beyond

The chart

It’s darkest before dawn, and in equity markets as well. Analysts at Goldman Sachs point out that equity markets tend to recover close to the peak in interest rates — but often drop into the final rate rises. “Further weakness in the labor market in the US – or higher energy prices in Europe – could well push the momentum data to be weaker in 1H 2023. This is an important data point to gauge when equity markets can sustain a recovery,” they say .

Random readings

A bluefin tuna was auctioned for $273,000 at a new year’s auction in Tokyo — more than double the top price last year.

Hong Kong is lifting a year-long ban on hamster imports.

How a furniture conservator solved a 20,000-year-old Ice Age puzzle.

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