60/40 portfolio replacement

What happened: Vanguard proposed a simple, low-cost 3-ETF portfolio (100% stocks) as a potential replacement for financial advisors, while BlackRock declared the traditional 60/40 portfolio (60% US stocks, 40% US bonds) "dead" due to changing correlations between stocks and bonds. A 2021 study found that plain vanilla portfolios underperformed diversified ones.

Market impact: The shift away from the 60/40 portfolio could lead investors to explore alternative asset classes like AI stocks and emerging-market debt. This could impact sectors like technology and financials, as well as emerging market currencies. The move towards simpler, low-cost portfolios could also benefit ETF providers like Vanguard.

What to watch next: BlackRock's upcoming earnings call (July 15) for insights into their replacement strategies for the 60/40 portfolio, and Vanguard's asset flow data (released quarterly) to monitor the adoption of their proposed 3-ETF portfolio. Additionally, keep an eye on emerging market bond and equity performance, as these could be key beneficiaries of the 60/40 portfolio's decline.