How to Manage the 60/40 Portfolio in Canadian Markets


• The 60 equity/40% bond portfolio has long been an asset allocation strategy that allows investors to benefit from the upside of equities and income of bonds.

• Over time it has largely performed as advertised. But in 2022 both bonds and equities have posted highly correlated and severe negative returns.

• At this juncture, bonds should find a floor once inflation slows and central bankers stop raising rates. But equities still face considerable downside risk from a slowing economy and a potential economic or geopolitical crisis.

• But none of this is written in stone either. Investors can maintain equity positions and limit downside exposure using equity derivatives.

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